Last question for tonight
| A Prudential Commodities oil dealer is quoting a bid of 30.25/barrel and an ask of 30.83/barrel in the spot market. At the same time, the lending and borrowing rates quoted by banks are 8% and 9%. Transaction cost is 50 basis points of the proceeds.
If there are no storage costs or income involved from holding oil and you can lend out 80% of the short proceeds, what would be the no-arbitrage price range for the 6-month oil contract?
31.46-32.22
31.06-32.22
31.22-32.22
31.94-33.60
Answer : B |
