The spot price of coffee is $0

Finance Dec 26, 2020

The spot price of coffee is $0.7454 per pound. The risk-free interest rate is 5.5 percent. The storage costs for ccoffee amount to $0.01 per pound per year. Required: A. What is the upper bound on the futures price of coffee for delivery in one year? (4 marks) B. If the futures price for delivery in one year was $0.8500, how much could an arbitrageur take advantage of this? (3 marks) C. On a contract for 150,000 pounds of coffee how much would the arbitrage profit be.

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