Consider a commodity that is used in production to manufacture other products. You can buy the commodity,
Fantastic news! We've Found the answer you've been seeking!
Question:
Consider a commodity that is used in production to manufacture other products. You can buy the commodity, but you cannot short sell it because producers who have it in their stock are unwilling to lend it; they would much rather have it in their stock for its convenience yield rather than lend it to you. If the current price is $55 and the simple interest and storage costs is 10% per annum, what is the one-year forward price that rules out any arbitrage opportunities?
Related Book For
Principles of Auditing and Other Assurance Services
ISBN: 978-0078025617
19th edition
Authors: Ray Whittington, Kurt Pany
Posted Date: