12. Futures prices (S27-4) Table 27.4 contains spot and six-month futures prices for several commodities and financial instruments. There may be some money-making opportunities.

See if you can find them, and explain how you would trade to take advantage of them. The interest rate is 14.5%, or 7% over the six-month life of the contracts.

Commodity Spot Price Futures Price Comments Magnoosium $2,550 per ton $2,728.50 per ton Monthly storage cost = monthly convenience yield.

Frozen quiche $0.50 per pound $0.514 per pound Six months’ storage costs = $0.10 per pound; six months’ convenience yield = $0.05 per pound.

Nevada Hydro 8s of 2024 77 78.39 4% semiannual coupon payment is due just before futures contract expires.

Costaguanan pulgas

(currency)

9,300 pulgas = $1 6,900 pulgas = $1 Costaguanan interest rate is 95%

per year.

Establishment Industries common stock

$95 $97.54 Establishment pays dividends of $2 per quarter. Next dividend is paid two months from now.

Cheap white wine $12,500 per 10,000-gal tank

$14,200 per 10,000-

gal tank Six months’ convenience yield =

$250 per tank. Your company has surplus storage and can store 50,000 gallons at no cost.

⟩ TABLE 27.4 Spot and six-month futures prices for selected commodities and securities. See Problem 12.