Calculate the 3-month future on Oil by the following information: (i) Spot Oil is trading at...
Calculate the 3-month future on Oil by the following information:
(i) Spot Oil is trading at 90USD per barrel.
(ii) USD interest rates are at 2%.
(iii) Storage charges for Oil are 1USD per barrel per month.
(iv) Insurance against Oil disasters costs 0.20c per
barrel.
(v) A spike in demand is likely to push Oil prices up by 5USD per
barrel.
Homework Answers
| Spot | USD/per barrel | 90.00 | A | |
| Interest rate | 2% | B | ||
| Storage charges | USD/month | 1.00 | C | |
| Insurance Cost | USD/month | 0.2 | D | |
| Future price | 90+5 | 95.00 | E | |
| e | 2.72 | F | e= the base of natural logs, approximated as 2.718 | |
| F= | 110.47 | A*e^((B+C-D)*3/12) |
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