Question

In August 2019, U.S. corn futures hit a three-month low after China said it would impose additional tariffs on U.S. grain products. Suppose the tariffs are believed to be a temporary trade policy. How do you think news of the tariffs would impact the implied convenience yield between short and long-maturity corn futures prices? Group of answer choices The convenience yield would fall (i.e., less positive, more negative). The convenience yield would rise (i.e., more positive, less negative). The convenience yield would remain the same, but the level of the curve would shift downwards. The convenience yield would remain the same, but the level of the curve would shift upwards.

Answer 1

Answer:

Option C (The convenience.............downwards) is the correct choice.

Explanation:

• Throughout this circumstance, the convenient yield would maintain the very same, although the curve amount or rate will change downwards since it is a transient trading strategy, but perhaps the effects will be negative and then it will proceed to something like a downward shift throughout the convenience curve.
• The yielding of convenience might maintain the same because, but perhaps the curve degree may change downwards.

All other decisions are not linked to the circumstance issued. So, the alternative here is the right one.