You are required to price a forward contract on copper. The current price of copper is...
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You are required to price a forward contract on copper. The current price of copper is $30 per ounce. You find a storage facility that charges $0.5 per ounce per year payable semiannually in advance. For instance, if you store one ounce of copper for a period of 1.5 years, then you have to pay $0.5/2 now, $0.5/2 in six months, and $0.5/2 in one year. Assume that interest rates are 1.0% for a maturity of 6 months, 3.0% for one year, and 5.0% for a maturity of 18 months. What is the price of a forward on copper with maturity 18 months? Provide your answer with two decimals (e.g. 10.25) You are required to price a forward contract on copper. The current price of copper is $30 per ounce. You find a storage facility that charges $0.5 per ounce per year payable semiannually in advance. For instance, if you store one ounce of copper for a period of 1.5 years, then you have to pay $0.5/2 now, $0.5/2 in six months, and $0.5/2 in one year. Assume that interest rates are 1.0% for a maturity of 6 months, 3.0% for one year, and 5.0% for a maturity of 18 months. What is the price of a forward on copper with maturity 18 months? Provide your answer with two decimals (e.g. 10.25)
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Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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