Question: a. What are some possible explanations for the shape of this forward curve? b. What annualized rate of return do you earn on a cash-and-carry

a. What are some possible explanations for the shape of this forward curve?
b. What annualized rate of return do you earn on a cash-and-carry entered into in December of Year 0 and closed in March of Year 1? Is your answer sensible?
c. What annualized rate of return do you earn on a cash-and-carry entered into in December of Year 0 and closed in September of Year 1? Is your answer sensible?

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a The forward prices reflect a market for widgets in which seasonality is important Let us look at two examples one with constant demand and seasonal ... View full answer

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