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C. You called a gold dealer and was randomly routed to one of its offices, which might have been its U.K., Europe, or Australia office.
C. You called a gold dealer and was randomly routed to one of its offices, which might have been its U.K., Europe, or Australia office. You wished to buy gold forward contract for delivery in one and a half years. The dealer on the phone quoted you a rate of $1950 per ounce. The spot price for gold is $1800 per ounce and the storage cost is 5% p.a.c.c. Calculate the risk-free rate used by the dealer (assume no arbitrage), and based on your answer, which office were you most likely speaking to? (The risk-free rate in U.K. is 0.1%, Europe is 0%, and Australia is 0.25%.) (4 marks) C. You called a gold dealer and was randomly routed to one of its offices, which might have been its U.K., Europe, or Australia office. You wished to buy gold forward contract for delivery in one and a half years. The dealer on the phone quoted you a rate of $1950 per ounce. The spot price for gold is $1800 per ounce and the storage cost is 5% p.a.c.c. Calculate the risk-free rate used by the dealer (assume no arbitrage), and based on your answer, which office were you most likely speaking to? (The risk-free rate in U.K. is 0.1%, Europe is 0%, and Australia is 0.25%.) (4 marks)
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