Table 6.1
$\begin{array}{lccc}
\begin{array}{c}
\text { Expiration } \
\text { Time }
\end{array} & \begin{array}{c}
\text { Wheat } \
\text { Cents/Bushel }
\end{array} & \begin{array}{c}
\text { Corn } \
\text { Cents/Bushel }
\end{array} & \begin{array}{c}
\text { Soybeans } \
\text { Cents/Bushel }
\end{array} \
\hline \text { Today }=\text { spot } & 540 & 610 & 1320 \
6 \text { months } & 560 & 600 & 1350 \
12 \text { months } & 590 & 587 & 1480 \
18 \text { months } & 625 & 580 & 1370 \
24 \text { months } & 655 & 570 & 1265
\end{array}$
-Refer to the table 6.1.What is the approximate annualized lease rate on the 18-month soybean forward contract?
A) 0.69%
B) 1.52%
C) 2.69%
D) 3.31%

Question

Table 6.1
 $\begin{array}{lccc}
\begin{array}{c}
\text { Expiration } \
\text { Time }
\end{array} & \begin{array}{c}
\text { Wheat } \
\text { Cents/Bushel }
\end{array} & \begin{array}{c}
\text { Corn } \
\text { Cents/Bushel }
\end{array} & \begin{array}{c}
\text { Soybeans } \
\text { Cents/Bushel }
\end{array} \
\hline \text { Today }=\text { spot } & 540 & 610 & 1320 \
6 \text { months } & 560 & 600 & 1350 \
12 \text { months } & 590 & 587 & 1480 \
18 \text { months } & 625 & 580 & 1370 \
24 \text { months } & 655 & 570 & 1265
\end{array}$
-Refer to the table 6.1.What is the approximate annualized lease rate on the 18-month soybean forward contract?
A) 0.69%
B) 1.52%
C) 2.69%
D) 3.31%

Quizplus · Accepted Answer

To find the annualized lease rate, we can use the formula:

$(1 + r)^{1/T} = F/S$

Where: 
- r is the annualized lease rate
- T is the time to expiration in years
- F is the forward price
- S is the spot price

For the 18-month soybean forward contract, we have:

- Spot price (S) = 1320 cents/bushel
- Forward price (F) = 1370 cents/bushel
- Time to expiration (T) = 1.5 years

Substituting these values into the formula, we get:

$(1 + r)^{1/1.5} = 1370/1320$

Solving for r, we find:

$r = (1.0238)^{1.5} - 1 \approx 0.0269$

Multiplying by 100 to convert to percentage, we get:

$r \approx 2.69\%$

Therefore, the approximate annualized lease rate on the 18-month soybean forward contract is 2.69%. The correct answer is C.

Table 61 -Refer to the Table 6