The current price of oil is $32.00 per barrel. Forward prices for 3, 6, 9, and 12

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The current price of oil is $32.00 per barrel. Forward prices for 3, 6, 9, and 12 months are $31.37, $30.75, $30.14, and $29.54. Assuming a 2% continuously compounded annual risk-free rate, what is the annualized lease rate for each maturity? Is this an example of contango or backwardation? Explain.

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Derivatives Markets

ISBN: 9789332536746

3rd Edition

Authors: Robert McDonald

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