Suppose that on Nov 1st the price of corn is $2.50/bushel, the effective monthly interest rate is 1%, and storage costs per bushel are $0.05/month. You know that corn is stored from Nov 1st to Feb 1st. Can you price the Feb 1st forward contract on one bushel of corn? Also, find the value on Nov 1st of the long position in 7 of the contracts on corn above the delivery price of $2.75 bushel?

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The Feb 1st forward contract 3 month forward rate o... View the full answer