Find the corn futures price

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Reference no: EM132528629

Consider a 1-year futures contract on corn. The current spot price for corn is $3.50 per bushel and it costs $0.04 per bushel to store corn for one year.

a. Find the corn futures price. Assume that the storage costs are paid at the end of the year and that the risk-free rate is 5% per annum.

b. Assume that the corn futures price is $3.65 per bushel. Calculate the convenience yield.

c. If it is expected that the inventory of corn (for the entire corn industry) is likely to increase, what is likely to happen to corn convenience yield.

Reference no: EM132528629

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