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Suppose unleaded gasoline is currently trading at $3.60 per gallon. You face an interest rate of 6.2 percent and a carrying cost of $0.09 per
Suppose unleaded gasoline is currently trading at $3.60 per gallon. You face an interest rate of 6.2 percent and a carrying cost of $0.09 per gallon per month. The current market price of a four-month futures contract on gasoline is $1.66 per gallon. You are evaluating a three-month carry trade opportunity. a. Determine the present value of the storage costs (PVSC). Note: Round your answer to 4 decimal places. b. Identify what the futures price should be under spot-futures parity. Note: Do not round intermediate calculations. Round your answer to 3 decimal places. c. Calculate the potential profit per gallon. Note: Round your answer to 2 decimal places
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