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The current spot price on copper is $2.1795/lb. The six month risk free rate is 40 bps/year. a. What is the arbitrage-free theoretical price on
The current spot price on copper is $2.1795/lb. The six month risk free rate is 40 bps/year. a. What is the arbitrage-free theoretical price on a six month futures contract for copper assuming no convenience yield? (Use 5 decimal places.) b. Now suppose the convenience yield is 80 bps/year. What is the implied price? (Use 5 decimal places.) c. The current price for the future in part a) is actually 2.1820/lb. What is the convenience yield implied by this price? d. After one month, the new futures price is 2.1120/lb. What is the value of this option to someone in a short position
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