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Suppose you need to forecast what the spot price of light, sweet crude oil will be in 21-months. You see that the current spot

 

Suppose you need to forecast what the spot price of light, sweet crude oil will be in 21-months. You see that the current spot price of light, sweet crude is $75 a barrel, and that the 21-month futures price is $78. Suppose the 21-month risk-free rate is 10% (EAY) and you estimate that the required return on crude oil is 4% per year (EAY). What is the market forecast of the spot price that will prevail for light, sweet crude oil in 21 months?

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