Question
The price of oil is $70 (spot), $75 (one-year forward), and $80 (two-year forward). Convenience yields and other costs and benefits of storing oil are
The price of oil is $70 (spot), $75 (one-year forward), and $80 (two-year forward). Convenience yields and other costs and benefits of storing oil are zero. What is the price of a two-year annual-pay oil commodity swap?
Hint: Extract continuous discount rates from the forward prices.
Group of answer choices
$ 71.42
$ 75.50
$ 77.42
$ 79.42
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Lessons In Corporate Finance
Authors: Paul Asquith, Lawrence A. Weiss
2nd Edition
1119537835, 978-1119537830
