The 3-month and 10-month forward prices for copper are $2.5346/lb and $2.6173/lb, respectively. The storage cost is
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The 3-month and 10-month forward prices for copper are $2.5346/lb and $2.6173/lb, respectively. The storage cost is 1.5% p.a. (continuous compounding). What is the 12-month forward price? How to make an arbitrage profit if the 12-month forward price is $2.58/lb?
(show transactions on 1,000 lb. Assuming that there is no convenience yield on copper.)
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