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5. Suppose it is March 2018. The WTI oil futures price for March 2019 is $75/barrel and the March 2018 spot price is $60/barrel. Your
5. Suppose it is March 2018. The WTI oil futures price for March 2019 is $75/barrel and the March 2018 spot price is $60/barrel. Your discount rate is 4% and it costs $1/barrel to store oil for a year. What should you do to maximize profits? Ignore any other transactions costs or non-monetary benefits (such as the convenience yield). (a) No trades are profitable, so doing nothing maximizes profits. (b) Sell oil on the spot market and simultaneously buy oil futures (c) Sell oil on the spot market and simultaneously sell oil futures (d) Buy oil on the spot market and simultaneously sell oil futures (e) Buy oil on the spot market and simultaneously buy oil futures
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