. The lower bound adjusts for the convenience yield and therefore explains why forward prices may appear lower at times when the convenience yield is accounted for. The upper bound depends on storage costs but not on the convenience yield.
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Suppose the owner of a commodity decides to lend out the commodity. If the commodity has a continuously compounded convenience yield of c, proportional to the value of the commodity, which of the following best represents the lowest forward price? A.  B.  C.  D.  |