In one of the topic test questions under derivatives regarding convenience yield, it asks:
Does convenience yield affect futures price?
Obviously it does according to the following two formulas:
FP = S0 (1+r)T + FV(NC), where FV(NC) is the future value of Net Costs = storage costs – convenience yield
FP = S0 (1+r)T - FV(NB), where FV(NB) is the future value of Net Benefits = yield on asset – convenience yield. If NB is positive, it will decrease the future price.
My confusion is related to which formula to use? how will I know if the convenience yield that is referred to by the question will lead to an increase/decrease of the futures price?