Explanation:
Backwardation is more likely when the factors that reduce forward prices are strong, especially a high convenience yield and a low risk-free rate.
Among the choices, C best fits that pattern:
These conditions are most likely to push the forward curve toward backwardation.
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Question 187.5: Which of the following commodities is most likely to imply a forward curve in backwardation?
A
low riskfree rate, low lease rate, low storage cost, low convenience yield
B
high riskfree rate, low lease rate, high storage cost, low convenience yield
C
low riskfree rate, high lease rate, low storage cost, high convenience yield
D
high riskfree rate, high lease rate, high storage cost, high convenience yield
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