thx. i understand the formulas. it’s pretty basic/intuitive.
but I fail to grasp (in plain english) why
If we started with a So rate of $300 for gold (1a), why are we now discounting it by the lease rate value in (1c) down to $295.5336. Is it because we are immediately leasing it and getting the lease payment on day 0?
Assuming we earn a convenience yield that exceeds storage, etc., say we were an industrial pipe maker and we had a pile of copper that gave us a convenience yield of 5% with 1% storage costs (both #s continuous compounding, etc.). Should we also discount the starting Spot by 4%?
If you are getting a lease payment on day 0 for question #1, then you would discount it, but not for #2 maybe ?? is my question.