Suppose that you run a copper mine. The cost of operating the mine is $10 million per
Fantastic news! We've Found the answer you've been seeking!
Question:
Suppose that you run a copper mine. The cost of operating the mine is $10 million per year. The current spot price of copper is $0.03/pound. The mine produces 400 million pounds per year. Suppose that the risk-free rate is 2% for all maturities, and that copper has a storage cost of 1% and a convenience yield of 6%. All rates are continuously compounded. How far into the future can you use copper forwards/futures to guarantee positive profits? You can assume that your costs will remain fixed.
Please show work and explain,
Related Book For
Posted Date: