7. Consider a 160-day forward con- tract on an asset priced at $135. The asset generates...

 

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7. Consider a 160-day forward con- tract on an asset priced at $135. The asset generates cash flows of $1.50 in 40 days and $1.75 in 120 days. It in- curs storage costs of $1.25 in 60 and 120 days, that is, every 60 days. The future value of the convenience yield is found to be $2.87. The risk-free rate is 3.55%. Find the forward price. 7. Consider a 160-day forward con- tract on an asset priced at $135. The asset generates cash flows of $1.50 in 40 days and $1.75 in 120 days. It in- curs storage costs of $1.25 in 60 and 120 days, that is, every 60 days. The future value of the convenience yield is found to be $2.87. The risk-free rate is 3.55%. Find the forward price.

Answer rating: 100% (QA)

To calculate the forward price we need to consider the present value of the assets cash flows ... View the full answer