Suppose that the spot price of crude is $58 per barrel and the futures price for...
Suppose that the spot price of crude is $58 per barrel and the futures price for delivery in 1 year is also $58 per barrel. If the interest rate is 2% storage costs are 1% then what is the convenience yield of crude?
Homework Answers
Answer:
Spot Rate S=58
Future rate F=58
interest rate r=2%
Storage cost s=1%
Let C be the convenience yield
So F=S*e^(r+s-C)
58=58*e^(2%+1%-C)
3%-C=0
C=3%
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