Cotton has a spot price for immediate delivery of $0.35 per pound. There is a market for cotton futures contracts for delivery in nine months. Each futures contract is for delivery of 50,000 pounds of cotton, with an initial margin of $5000 per contract. The per-annum net convenience yield for holding cotton over the next nine months is 1%. The interest rate is 5%, stated as a continuously- compounded annual rate. What is the current futures price of cotton for delivery in nine months?

Answer rating: 100% (QA)

A 1 Spot Price of cotton per pound 2 Futures contract size Pounds 3 Initial margin required per con... View the full answer