Explanation:
I is true: a positive lease rate, like a convenience yield or dividend yield, tends to reduce the forward price, all else equal.
II is false: the comparison is not quite right. A dividend yield is observable, but it does not require a storable commodity, and lease rates are typically inferred rather than directly observed.
Therefore, the correct answer is A. I only.
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Question 187.6: Consider the following statements about the commodity lease rate:
I. A positive lease rate, convenience yield and dividend yield are similar in that they all, ceteris paribus, tend to push the commodity forward curve down (toward backwardation)
II. A lease rate (on a consumption commodity) is like a dividend yield (on a financial commodity like a stock index) in that both are observable, require a storable commodity, and are earned by the owner regardless of whether the commodity is loaned
According to McDonald, which of the statements is (are) TRUE?
A
I. only
B
II. Only
C
Both I. and II.
D
Neither I. nor II.