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The spot price of silver is $20 per ounce. The storage costs are $0.30 per ounce per year payable quarterly in advance. Assuming that interest rates are 4% per annum for all maturities, calculate the futures price of silver for delivery in 12 months.

Respuesta :

TomShelby

Answer:

21.11176754

Explanation:

storate cost: 0.30

as the storage is continusly we use continuos interest rate:

0.30 / 4 = 0.075 per quarter

this is paid in advance so we calculate the present values of this payment

[tex]PV = 0.075 + 0.075e^{-0.04 \times 0.25} + 0.075e^{-0.04 \times 0.50}+0.075e^{-0.04 \times 0.75}[/tex]

PV = 0.295552053

Now we solve for the future value of silver using also a continuos rate

[tex]F = (spot + storage) e^{0.04 \times 1}[/tex]

(20 + 0.295552053)e^0.04 = 21.11176754

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