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What is the copper futures price

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Suppose It is the starting date of the current quarter now. There is a 6-month futures contract on copper. The copper's spot price now is $2.90/pound. The storage cost for copper is 0.36/per pound annually. The storage cost is paid at end of each quarter. The copper does not provide income. However, the copper may provide some benefits to the owner if the copper is held as a consumption asset. The risk-free interest rate is 3% per annum with continuously compounding.

-(a) What is the copper's futures price if we assume the copper is an investment asset?

-(b) What is the upper bound of the copper's futures price if we assume the copper is a consumption asset.

Reference no: EM132660451

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