Suppose that you are given with the following information on a futures contract with a certain commodity of interest and 6 months to maturity, So = 96.50 as the spot (cash) price, F = $99.15 as the current future price of the contract. Suppose the per annum risk-free rate is 3%, and assuming that there is no arbitrage opportunity in the futures market,

a) what is the convenience yield for this contract provided that the current futures price is equal to the expected futures price? What does the convenience yield mean?

b) if the current futures price F = $105.2, are we having a contango or normal backwardation? Why? What is a contango or normal backwardation anyway?

c) Suppose you have a call option on the above futures contract with strike price as $97.50 matures in 6 months, what is the options value if the volatility of the underlying commodity price is $2.70?