If the present value of storage costs exceeds the present value of its convenience yield, then a commodity’s forward price is most likely:

Question

BlackTom AI · Accepted Answer

When evaluating forward prices for commodities, the cost-of-carry framework tells us that forward price F0 is influenced by the spot price growth at the risk-free rate plus adjustments for storage costs and convenience yield.
Option 1: 'Higher than the spot price compounded at the risk-free rate' — This aligns with the usual cost-of-carry formula: if PV of storage costs exceeds PV of convenience yield, the net carry cost is positive, pushing the forward price above the risk-free-compounded spot. In other words, storage costs add a premium to carrying the commodity, so F0 > S0 e^{rT} (or S0(1+r)^T in discrete terms).
Option 2: 'The same as the spot price compounded at the risk-free rate' — This would imply zero net carry, meaning storage costs perfectly offset convenience yield benefits. That would require PV(storage) = PV(convenience yield). The given condition states the opposite (storage costs dominate), so this option is inconsistent with the scenario described.
Option 3: 'Less than the spot price compounded at the risk-free rate' — A forward price below the risk-free-compounded spot would indicate a net negative carry (benefits outweigh costs), which would occur if convenience yield is large relative to storage costs. However, the premise states storage costs dominate the reduction, not the increase, so this option contradicts the stated condition.
In summary, the relationship between PV(storage) and PV(convenience yield) determines the forward premium or discount: a higher PV(storage) relative to PV(convenience yield) implies a positive carry, hence F0 exceeds the risk-free growth of the spot price. The other options either imply a neutral carry or a negative carry, which do not fit the given comparison of present values.

If the present value of storage costs exceeds the present value of its convenience yield, then a commodity’s forward price is most likely:单项选择题

类似问题

If the present value of storage costs exceeds the present value of its convenience yield, then the commodity’s forward price is most likely:

The spot price of a stock index is $1000, the risk-free interest rate is 7%, and the continuous dividend yield on the index is 2%. What is the cost of carrying this asset over time?

A 62.9 kg lady is standing on a weighing scale in an elevator as shown in the diagram below. Assume gravitational acceleration = 15 ms-2 Given that the elevator is accelerating upwards at 3.7 ms-2 , determine the magnitude of the normal force on the lady.

An object is fired from ground level at an angle of 31.9 degrees to the horizontal. Taking acceleration due to gravity = 7.65 ms-2 If the initial speed is 5.6 ms-1, how far from the starting point will it hit the ground? Assume air resistance is negligible.

Which of the following equations of motion would be used to calculate the displacement given the initial and final velocities as well as the acceleration?

A 51.8 kg lady is standing on a weighing scale (calibrated to 9.81 ms-2) in an elevator as shown in the diagram below. The scale is then calibrated to 7.67 ms-2 Given that the elevator is accelerating downwards at 2.2 ms-2 , determine the reading on the scale.

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单