1. Your analysis of commodities prices reveals that the expected price of a barrel of oil next year is $110 and the beta of oil equals 1.2. You also know that the one-year risk free rate is 3 percent and the market risk premium is 5 percent. Using this information, calculate the correct one-year futures price for a barrel of oil. If you picked up a newspaper and discovered that the one-year futures price of oil is currently being quoted at $102, would you want to buy or sell these futures contracts? 

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Calculating the OneYear Futures Price for Oil 1 Use the Capital Asset Pricing Model CAPM Formula Exp... View the full answer