a. If the spot price of gold is $1,500 per troy ounce, the risk-free interest rate is

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a. If the spot price of gold is $1,500 per troy ounce, the risk-free interest rate is 2%, and storage and insurance costs are zero, what should be the forward price of gold for delivery in one year? Use an arbitrage argument to prove your answer.

b. Show how you could make risk-free arbitrage profits if the forward price is $1,550.

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Investments

ISBN: 9781259277177

11th Edition

Authors: Zvi Bodie, Alex Kane, Alan J. Marcus

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Question Posted: Jul 24, 2024 05:05 AM

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a. If the spot price of gold is $1,500 per troy ounce, the risk-free interest rate is

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Investments

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