Answer:
$3.19208 per bushel
Step-by-step explanation:
As we know that:
Future Price = Spot rate * e ^[(Rf + Storage Cost)*T]
Here
Future price is the price that the farmer wants to lock with a 1 year future contract
Spot rate is the price of corn today which is $3.07 per bushel
Rf is the risk free rate of return which is 3.7%
The incremental storage cost is 0.2% to store a single bushel of corn
T is the number of years which is 1 year in this case
By putting values, we have:
Future Price = $3.07 per bushel * e^[(3.7% + 0.2%)*1 year]
Future Price = $3.19208 per bushel