The spot price of wheat is $2.90/bushel. The one-year futures price is $3/bushel. If the risk-free rate is 5 percent, calculate the net convenience yield.

Question

Quizplus · Accepted Answer

The net convenience yield is the difference between the futures price and the spot price, divided by the spot price and multiplied by the risk-free rate. In this case, the net convenience yield is ($3 - $2.90) / $2.90 * 5% = 0.0160.

The Spot Price of Wheat Is $2