Today refers to the 2/26/16 Wall Street Journal. (The answers would be the same if today were 12/16/20) Futures prices are related to the following: spot price, cost of carry (financing cost + storage cost) & convenience value. Fill out the boxes in columns (b), (c) & (d) of the table below to indicate whether these costs are positive (+), negative (-) or zero (0) by placing +, - or in the appropriate box where Column (a) represents the Financing Cost (FC) in a cash & carry arbitrage. Since the FC is a cash outflow, this column is all + as shown. Column (b) represents the Storage Cost (SC) in today's market. Column (c) represents the sum of these costs (FC + SC) in today's market. Column (d) represents the Convenience Value in today's market. NOTE: Cash Outflows are positive (+) costs; Cash Inflows are negative (-) costs. In column (e), indicate whether the market structure of the futures contracts on these commodities, as evidenced by the prices today, are in contango or backwardation by placing a C or B in column (e). For the T-bond futures contract, the answers to columns (b), (c), (d) and (e) are respectively (a) (b) (c) (d) (e) Commodity Financing Cost Storage Cost Financing Cost + Storage Cost Convenience Value Market Structure GOLD SP500 BONDS COPPER + + For the gold futures contract, the answers to columns (b), (c), (d) and (e) are respectively +, +,0,0 ,,,C ,,O,B 0,1,0,B Today refers to the 2/26/16 Wall Street Journal. (The answers would be the same if today were 12/16/20) Futures prices are related to the following: spot price, cost of carry (financing cost + storage cost) & convenience value. Fill out the boxes in columns (b), (c) & (d) of the table below to indicate whether these costs are positive (+), negative (-) or zero (0) by placing +, - or in the appropriate box where Column (a) represents the Financing Cost (FC) in a cash & carry arbitrage. Since the FC is a cash outflow, this column is all + as shown. Column (b) represents the Storage Cost (SC) in today's market. Column (c) represents the sum of these costs (FC + SC) in today's market. Column (d) represents the Convenience Value in today's market. NOTE: Cash Outflows are positive (+) costs; Cash Inflows are negative (-) costs. In column (e), indicate whether the market structure of the futures contracts on these commodities, as evidenced by the prices today, are in contango or backwardation by placing a C or B in column (e). For the T-bond futures contract, the answers to columns (b), (c), (d) and (e) are respectively (a) (b) (c) (d) (e) Commodity Financing Cost Storage Cost Financing Cost + Storage Cost Convenience Value Market Structure GOLD SP500 BONDS COPPER + + For the gold futures contract, the answers to columns (b), (c), (d) and (e) are respectively +, +,0,0 ,,,C ,,O,B 0,1,0,B
