Question
a) Price GOLD SPOT PRICE USD 1,500 per ounce. Price quote FUTURE GOLD PRICE 1-year USD 1,600 per ounce. Interest rate = 5% per year
a) Price GOLD SPOT PRICE USD 1,500 per ounce. Price quote FUTURE GOLD PRICE 1-year USD 1,600 per ounce. Interest rate = 5% per year What arbitrage strategy can an investor make? How much profit/loss can investors get?
b) XYZ shares are listed and traded on the London and New York exchanges in parallel and can be traded freely on both exchanges. XYZ's stock is quoted in London at 100 and in New York at $157. The current exchange rate is 1 = USD1.55 What arbitrage strategies can an investor make? How much profit/loss can investors get?
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
14th edition
007745443X, 978-0073530727, 73530727, 978-0077454432
