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NISM Certifications · NISM-Series-XV: Research Analyst · Fundamental Analysis of Commodities

Spot price of a non-perishable commodity is Rs 50,000 per unit. Storage and insurance cost is Rs 1,000 per unit for the 3-month period, paid at the start. Financing cost is 8% per annum simple interest on the spot price plus storage cost. Ignoring convenience yield, the theoretical 3-month futures price (to the nearest rupee) is:

The theoretical futures price is Rs 52,020. Add storage of Rs 1,000 to the spot price of Rs 50,000 to get Rs 51,000, then add three months' interest at 8%, which is Rs 1,020, giving the cost-of-carry price.

  1. ARs 52,000
  2. BRs 52,020Correct
  3. CRs 51,000
  4. DRs 53,040

Explanation

Investment base = 50,000 + 1,000 = 51,000. Interest for 3 months = 51,000 x 8% x 0.25 = 1,020. Futures price = 51,000 + 1,020 = 52,020. Rs 52,000 ignores interest on the storage cost; Rs 51,000 ignores interest entirely.

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