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The spot price for crude oil is $30 per barrel. The storage cost is 2.5% per...

The spot price for crude oil is $30 per barrel. The storage cost is 2.5% per annum. The risk-free interest rate is 7.5% with continuous compounding. The futures price for a one-year contract on crude oil should be __________.

A) $31.59                          B) $32.08                    C) $33.16                    D) $34.51

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Answer #1

Correct answer: C) $33.16

Current Price of crude oil (S) = $30

Risk free rate (r) = 7.5%

storage cost (c) = 2.5%

Maturity (t) in year = 1

Future Price (F) of crude oil per barrel woudl be:

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