The spot price of silver is $25 per ounce. The storage costs are $0.24 per ounce per year payable quarterly in advance. Assuming that interest rates are 5% per annum for all maturities, calculate the futures price of silver for delivery in 9 months.

The future price of Silver is $26.14

Explanation:

First we compute Total storage costs(Tsc) in the future given by the equation:

Tsc = (Sc/4) * [  1 + exp(-rT1) + exp(-rT2) ]

where Sc is the storage cost today

where r is the rate

Sc = $0.24

T1 = 3/12

T2 = 6/12

r = 5%=5/100

 = 0.05

Tsc = (0.24/4) [ 1 + exp(0.05*3/12) + exp(0.05*6/12) ]

Tsc = 0.06 [ 1 + exp(-0.05×0.25) + exp(-0.05×0.5) ]

Tsc = 0.178

The future price( Fv) is given by:

Fv = (Sp+ Tsc) *exp(rt)

where Sp is the spot price of silver

where r is the interest rate

where t is the delivery time ratio (9 months compared to 12 months)

Sp = $25

r = 5%

 = 5/100=0.05

t = 9/12

   =0.75

Fv = (25. 000+0. 178) * e xp(0. 05×0 .75 )

Fv = $26. 14

if you use only 25 for your entertainment and only 200 for the groceries that you really need and take out the 50 per month for the computer then that should be enough