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The spot price of oil is $50 per barrel and the cost of the storing a...

The spot price of oil is $50 per barrel and the cost of the storing a barrel of oil for one year $3. payable at the end of the year. The risk free interest rate is 5% per annum continuously compounded. What is an upper bound for the one year futures price of oil? Show your calculations in excel preferably.

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Answer #1

We see that the upper bound for the one year futures price of oil=50*exp(5%*1)+3=55.56355482

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