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The current price of platinum is $1,100 per ounce. The total storage costs are $36 per...

The current price of platinum is $1,100 per ounce. The total storage costs are $36 per ounce per year ($9) payable quarterly in advance. Assuming that interest rates are 5% per annum for all maturities, calculate the futures price of platinum for delivery in nine months.

Solutions

Expert Solution

Future Price of Platinum for delivery in nine months time = $1,169.72

Note:

1. Future price equals the current value plus cost of all associated costs (storage costs) compounded continuously at the rate of interest.

It is calculated as follows:

Future Price = (Current Price + Present Value of all associated costs(storage costs))*e^(interest rate*time period)

2. For continuously compounding, excel function '=EXP' used

jeff jeffy answered 1 year ago
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