In a normal futures market with annual interest rates at 8%, - TopicsExpress



          

In a normal futures market with annual interest rates at 8%, monthly storage charges at one cent per bushel, a cash price of $2.20 per bushel and a December corn futures contract at $2.23 per bushel, one would expect the March futures contract to be priced at: a.225 1/2 b.226 c.228 d.230 3/8 Explanation: Incorrect. The March futures contract would be priced at 230 3/8, calculated as follows: cash price x interest rate = monthly interest 12 2.20 x 8% = 1.46 monthly interest 12 1.46 cents interest + 1 cent storage = 2.46 monthly carrying charge December to March has a three month cost of carry. 2.46 per month x 3 months 7.38 carrying charge for 3 months Nearby futures contract price + 3 months cost of carry March futures price $2.23 + 7.38 cents = 230 3/8 cents i wasnt even close lololol
Posted on: Mon, 18 Nov 2013 21:25:15 +0000

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