Question
The current price of crude oil is $32 . 00 per barrel. Forward prices for 3, 6, 9, and 12 months are $31 . 37,
The current price of crude oil is $32.00 per barrel. Forward prices for 3, 6, 9, and 12 months are $31.37, $30.75, $30.14, and $29.54. Assuming a 2% continuously-compounded annual risk-free rate.
- Suppose there is an active leasing market for crude oil with continuously-compounded annual lease rate q. What is the lease rate qfor each maturity?
- Suppose there is no leasing market or carry cost. What is the convenience yield cfor each maturity?
- Is this an example of contango or backwardation?
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Public Finance In Canada
Authors: Harvey S. Rosen, Ted Gayer, Jean-Francois Wen, Tracy Snoddon
5th Canadian Edition
1259030776, 978-1259030772
