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Question 2. Contango and Backwardation (7 marks) a. Define and contrast contango and normal contango . (1.5 marks) b. Define and contrast backwardation and normal

Question 2. Contango and Backwardation (7 marks)

a. Define and contrast contango and normal contango. (1.5 marks)

b. Define and contrast backwardation and normal backwardation. (1.5 marks)

c. Explain the relationship between contango, cost-of-carry, and convenience yield. (2marks)

d. Explain the relationship between backwardation, cost-of-carry, and convenience yield. (2 marks)

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