EOC Reading 33 Question 2 part C

how did cfai get the FV of the storage cost to be -0.0305, -0.0309?

storage cost is 0.03 and compounded interest is 6%

.03 * 1.06^(3/12) time from June Payment until sept 3 months

.03 * 1.06^(6/12) time from March until sept 6 months

layout the cashflows on a time line

June Payment bring forward 3 months

March Payment bring forward 3 months

September its already at that point in time t.

notice it’s continuously componding rate.

for the june payment 03 * 1.06^(3/12) = 3.04. is the .01 difference rounding?

Good catch Tulkuu

Its .03*e^(.06*3/12)



the .01 difference that Tulkuu pointed out about continuously compounding.