44:59
Stop
CFA Level 2 - Economics
Intermediate
1/45
UVW Corp. enters into a forward contract to sell 3,000 units of a commodity in 4 months at a price of $150 per unit. The current spot price of the commodity is $140 per unit, the risk-free interest rate is 6% per annum, and the storage cost is $2.50 per unit per month. The commodity's price volatility is estimated at 20%. The convenience yield is estimated at 4% per annum. Using the cost of carry model for pricing forwards with convenience yield, what is the fair value of this forward contract?
Intermediate