Question: A commodity spot price is $100 per unit. A forward contract is agreed for purchase of 1,000 units of the commodity in 7 months time.

A commodity spot price is $100 per unit. A forward contract is agreed for purchase of 1,000 units of the commodity in 7 months time. Total storage cost over 7 months is $20,000. Convenience yield is 2% p.a. on a continuous compounding basis. Interest is also continuously compounded at 3% p.a. Find the forward price of this contract

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