Multiple Choice
A commodity has a spot price of $25 and a one-month forward price of $25.02. The one-month risk-free rate is 2% in continuously compounded and annualized terms. Assuming no other costs or benefits of carry on the commodity, what must be the lower bound on the convenience yield that prevents arbitrage?
A) 0%
B) 1%
C) 2%
D) 3%
Correct Answer:
Verified
Correct Answer:
Verified
Q8: You are long a forward on the
Q9: Two stocks, A and B, have
Q10: The spot price trades at the following
Q11: Stock A has a spot price of
Q12: Backwardation becomes more likely when, ceteris paribus,<br>A)
Q14: The volatility of a stock index falls
Q15: If the implied repo rate is
Q16: CAP Inc.'s stock is trading at $40.
Q17: If there is a convenience yield, then
Q18: The risk-free interest rate drops but the