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b) You wish to arrange a forward purchase of 1 unit of commodity B with delivery in 3 months. The spot price of B is

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b) You wish to arrange a forward purchase of 1 unit of commodity B with delivery in 3 months. The spot price of B is 350 per unit and the stated annual 3-month interest rate is 4%. If the commodity costs 10 per quarter to store (payable at the end of the quarter) develop an arbitrage argument which allows you to work out the delivery price you should be prepared to pay in 3 months. [6 marks]

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