The crude oil futures price expiring in 9 months from now is $120 while the spot price of crude oil is $115. If the risk-free rate is 5% and the storage cost yield is 2%, both continuously compounded annual rates, what is the implied convenience yield of the crude oil? A. 1.21% B. 1.28% C. 1.33% D. 2% E. None of the above
Added by Rachel H.
Step 1
First, we need to calculate the cost of carry, which is the sum of the risk-free rate and the storage cost yield: Cost of carry = 5% + 2% = 7% Show more…
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