Multiple Choice
A commodity has a spot price of $25 and a one-month forward price of $25.02.The one-month risk-free rate is 2% in continuously compounded and annualized terms.Assuming no other costs or benefits of carry on the commodity,what must be the lower bound on the convenience yield that prevents arbitrage?
A) 0%
B) 1%
C) 2%
D) 3%
Correct Answer:
Verified
Correct Answer:
Verified
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