What is one of the consequences of increasing benefits of carry in forward pricing?

The consequences of increasing benefits of carry in forward pricing primarily relate to how the costs and opportunities associated with holding an asset influence its future pricing. When the benefits of carry increase—such as through lower storage costs or higher expected future returns—this typically results in an increase in the fair future price. This is because the cost of holding the asset is now outweighed by the potential returns, encouraging investors to bid higher for future delivery of the asset.

The fair future price is determined by factors such as yield, interest rates, and convenience yield, all of which are impacted by the carry benefits. Increasing carry makes it more attractive to hold the asset, leading to higher demand in future contracts.

Consequently, as the benefits of carry rise, the eventual pricing mechanism adjusts upward to reflect the change in the market's valuation of holding the asset. This creates an upward pressure on the forward price as investors anticipate greater future value, thereby making option C more aligned with the expected outcome.

Therefore, understanding that rising benefits of carry contribute to an increase in expected future prices is crucial for grasping market dynamics in investment and hedging strategies involving forward contracts.