CFAI book Vol 4 page 429 question 3: Using forward price of $2.65, the solution in the back shows that there is a positive storage cost. In other words in this reverse CandC, the investor who shorted the commodity and went long the forward receives cash for storing corn. How does the investor store corn, he/she in theory “borrows corn, sells it short and invests the proceeds at risk-free”. I simply could not understand why there is a positive storage cost and why the investor will not have to pay the lease rate for borrowing the commodity. Any thoughts are appreciated. CFAI book Vol 4 page 429 question 2: Now in this question, the answer assumes that the investor is able to purchase the commodity that costs $3.00. I thought this money was borrowed and you need pay an interest on that in other words there is an opportunity cost on the capital. It is not considered any thoughts. I wonder if I am digging too deep or if I’m simply too naive or this is total BS!
How about giving us the question?