The spot price of oil is $60.80 per barrel and the cost of storing a barrel...

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The spot price of oil is $60.80 per barrel and the cost of storing a barrel of oil for one year is $4.50, payable at the end of the year. The risk-free interest rate is 1.2% per annum, continuously compounded. a. b. C. What is an upper bound for the one-year futures price of oil? If the one-year futures price is $57.25 per barrel, is there a potential for making an arbitrage profit? If part b. indicates and opportunity exists, and assuming you have access to storage facilities and funding as outlined in the problem, what would be your arbitrage profit per barrel? The spot price of oil is $60.80 per barrel and the cost of storing a barrel of oil for one year is $4.50, payable at the end of the year. The risk-free interest rate is 1.2% per annum, continuously compounded. a. b. C. What is an upper bound for the one-year futures price of oil? If the one-year futures price is $57.25 per barrel, is there a potential for making an arbitrage profit? If part b. indicates and opportunity exists, and assuming you have access to storage facilities and funding as outlined in the problem, what would be your arbitrage profit per barrel?

Answer rating: 100% (QA)

a To find the upper bound for the oneyear futures price of oil we can use the co... View the full answer