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Question-165.1. Assume the spot price of wheat is $7.00 per bushel with a storage cost of 12.0% per annum while the riskless rate is 4.0%, both compounded continuously. What is the implied six-month futures price, F(0.5)? | Financial Risk Manager Part 1 Quiz - LeetQuiz

Explanation:

Use the cost-of-carry formula for a commodity with no income:

F_0 = S_0 e^{(r + u)T}

where:

$S_0 = 7.00$
$r = 0.04$
$u = 0.12$
$T = 0.5$

So,

F_0 = 7.00 \times e^{(0.04+0.12)\times 0.5} = 7.00 \times e^{0.08} \approx 7.00 \times 1.08329 \approx 7.58

Correct answer: D. $7.58

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Question-165.1. Assume the spot price of wheat is `$7.00` per bushel with a storage cost of 12.0% per annum while the riskless rate is 4.0%, both compounded continuously. What is the implied six-month futures price, F(0.5)?

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