The spot price of gasoline is 106 cents per gallon and the annualized risk free interest rate is 4.0%. Given a lease rate of 1.0%, a continuously paid storage rate of 0.5%, and a convenience yield of 0.75%, what is the no-arbitrage price range of a 1-year
A)
108.96 to 109.78
B)
107.42 to 108.96
C)
106.00 to 108.96
D)
107.42 to 109.78
Answer:
A
Business
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