NISM Certifications · NISM-Series-XV: Research Analyst · Fundamental Analysis of Commodities
A commodity is spot-priced at Rs 60,000 per unit. Storage plus insurance cost is Rs 1,200 per unit for the period and financing cost is 6% for the period on the spot price. Ignoring any convenience yield, the theoretical futures price under the cost-of-carry model is:
The theoretical futures price is Rs 64,800. It equals the spot price of Rs 60,000 plus Rs 3,600 financing cost (6%) plus Rs 1,200 storage and insurance, since cost-of-carry adds all holding costs to spot when there is no convenience yield.
- ARs 64,800Correct
- BRs 61,200
- CRs 62,400
- DRs 66,000
Explanation
Financing = 6% of 60,000 = 3,600. Futures = spot + financing + storage = 60,000 + 3,600 + 1,200 = 64,800. Rs 63,600 would omit storage, and Rs 61,200 omits financing, a missed adjustment. Rs 62,400 would be wrong as it adds only part of the costs.
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