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What is the one-year forward price

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Consider a commodity that is used in production to manufacture other products. You can buy the commodity, but you cannot short sell it because producers who have it in their stock are unwilling to lend it; they would much rather have it in their stock for its convenience yield rather than lend it. If the current price is $100 and the simple interest rate is 5% per annum, what is the one-year forward price F(0, 1) that rules out any arbitrage possibilities?

Reference no: EM132686959

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