Q.4. Roger Guidry, CIO of a university endowment fund, is reviewing investment data related to the endowment's investment in energy commodities. (4 Marks)

A. Calculate the roll yield for Year 1. B. Calculate the collateral yield for Year 2.

Guidry notes that the collateral yield is positive in both scenarios, although the GSCI total annual return for Year 2 is -30.5 percent. He asks for an explanation with regard to the positive collateral yield.

C. Justify the positive collateral yield by discussing the concepts of margin and implied yield.

A consultant tells Guidry: "Commodities exhibit positive event risk."

D. Justify the consultant's statement by discussing the relationship between commodity prices and event risk.

\begin{tabular}{ccccc} & GSCITotal & GSCICollateral & GSCI Roll & GSCI Spot \\ Year & Annual Return & Yield & Yield & Annual Return \\ \hline 1 & 29.1% & 9.6% & ! & 6.1% \\ 2 & 30.5% & ? & 14.2% & 24.3% \\ \hline \hline \end{tabular} \begin{tabular}{ccccc} & GSCITotal & GSCICollateral & GSCI Roll & GSCI Spot \\ Year & Annual Return & Yield & Yield & Annual Return \\ \hline 1 & 29.1% & 9.6% & ! & 6.1% \\ 2 & 30.5% & ? & 14.2% & 24.3% \\ \hline \hline \end{tabular}