The spot price for corn is 10.33 dollars per bushel. The risk free rate is 2.5% per annum.

If your storage and spoilage cost of carry is 10% per year, What fair price would you use for selling a two year forward contract? 

Answer rating: 100% (QA)

To calculate the fair price for selling a twoyear forward contract we can use the costof carry model According to the model the forward price is given by the spot price adjusted for the cost of carrying the underlying asset until the delivery date The cost of carry includes the storage cost the interest cost and any other costs associated with holding the asset In this case the cost ... View the full answer