If the spot price for silver is $18.56 per ounce, what should the futures contract price be for a three-month contract at an annual interest rate of 3.5%?
A)$18.60
B)$18.68
C)$18.72
D)$18.75
E)$18.77

Question

Quizplus · Accepted Answer

We can use the formula for calculating futures contract price:

Futures contract price = Spot price x (1 + annual interest rate x time to delivery)

In this case, the spot price is $18.56, the annual interest rate is 3.5%, and the time to delivery is three months (or 0.25 years). Plugging in the numbers, we get:

Futures contract price = $18.56 x (1 + 0.035 x 0.25) 
Futures contract price = $18.56 x 1.00875 
Futures contract price = $18.72

Therefore, the futures contract price should be $18.72, which is answer choice C.

If the Spot Price for Silver Is $18