Suppose the cotton (a storable commodity) futures prices are currently Expiry Month Price c/lb December 2021 83 December 2022 96 (a) Is the cotton market in contango or in backwardation? (b) What is the slope of the futures curve for cotton? Draw a future curve graph to support your answer. (c) Are there positive returns to storage between Dec 21 and Dec 22? Draw a graph of supply and demand for storage to support your answer (where t=Dec 21 and t+1=Dec 22).
Suppose the cotton (a storable commodity) futures prices are currently Expiry Month Price c/lb December 2021 83 December 2022 96 (a) Is the cotton market in contango or in backwardation? (b) What is the slope of the futures curve for cotton? Draw a future curve graph to support your answer. (c) Are there positive returns to storage between Dec 21 and Dec 22? Draw a graph of supply and demand for storage to support your answer (where t=Dec 21 and t+1=Dec 22).
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter5: Business And Economic Forecasting
Section: Chapter Questions
Problem 8E: Bell Greenhouses has estimated its monthly demand for potting soil to be the following: N=400+4X...
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Suppose the cotton (a storable commodity) futures prices are currently
Expiry Month |
Price c/lb |
December 2021 |
83 |
December 2022 |
96 |
(a) Is the cotton market in contango or in backwardation?
(b) What is the slope of the futures curve for cotton? Draw a future curve graph to support your answer.
(c) Are there positive returns to storage between Dec 21 and Dec 22? Draw a graph of supply and demand for storage to support your answer (where t=Dec 21 and t+1=Dec 22).
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