Question
Suppose the current price of aluminum is $1000 per 25 metric tons (which is 1 contract unit), and the risk-free rate for all maturities is
Suppose the current price of aluminum is $1000 per 25 metric tons (which is 1 contract unit), and the risk-free rate for all maturities is 4% with continuous compounding. The storage costs are 0.5% of the spot price, while the convenience yield is 1.25% of the spot price. What is the two-year forward price for 25 metric tons of aluminum?
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Financial management theory and practice
Authors: Eugene F. Brigham and Michael C. Ehrhardt
12th Edition
978-0030243998, 30243998, 324422695, 978-0324422696
