Multiple Choice
The spot price of gasoline is 258 cents per gallon and the annualized risk free interest rate is 4.0%.Given a lease rate of 1.0%,a continuously paid storage rate of 0.5%,and a convenience yield of 0.75%,what is the no-arbitrage price range of a 1-year forward contract (in cents) ?
A) 265.19 to 267.19
B) 258 to 265.19
C) 258 to 267.19
D) 247.16 to 265.19
Correct Answer:
Verified
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