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Suppose unleaded gasoline is currently trading at $2.80 per gallon. You face an interest rate of 4.60 percent and a carrying cost of $.11 per
Suppose unleaded gasoline is currently trading at $2.80 per gallon. You face an interest rate of 4.60 percent and a carrying cost of $.11 per gallon per month. The current market price of a four-month futures contract on gasoline is $3.30 per gallon. You are evaluating a three-month carry trade opportunity. a. Determine the present value of the storage costs (PVSC). (Round your answer to 4 decimal places.) Answer is complete and correct. PV of storage costs $ 0.3275 b. Identify what the futures price should be under spot-futures parity. (Do not round intermediate calculations. Round your answer to 3 decimal places.) Answer is complete and correct. Futures price $ 3.158 c. Calculate the potential profit per gallon. (Do not round intermediate calculations. Round your answer to 3 decimal places.) Answer is complete but not entirely correct. Potential profit per gallon $ 0.000 x
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