00:01
Hello students, we are given a question here that suppose there is no storage costs for crude oil and the interest rate for borrowing is 5 percentage per annum.
00:12
Now we are asked in this question like how could you make money if the june and december futures contracts for a particular year trade at $60 and $66 respectively.
00:24
So we are supposed to know that here we can take here june and june.
00:30
Future contract as a long position we can say that take june future contract contract as a long position as 60 students and a december a december future contract okay students as a short position as short position, okay, students, as $86, sorry, as $66.
01:19
Now, here we are supposed to know that it is the first step, second is like, then borrow, then borrow $60 and get delivery of oil.
01:34
Get the delivery of oil.
01:39
Okay, students.
01:40
Step 3 should be like sell the oil at $66 and pay the interest expense and pay the interest expense and pay the interest expense and principal.
02:05
Okay students? so further we are supposed to know that how we will calculate it.
02:11
Now mathematical method it should be like the $60 times 5 .5.
02:15
As we are given the interest, it is 5 percentage...