Question
Given: The 1-year forward price of gold is $2000 r0,1 = 5% (annual rate with annual compounding) The future value of storage costs as of
Given: The 1-year forward price of gold is $2000 r0,1 = 5% (annual rate with annual compounding) The future value of storage costs as of t = 1 is $1 per ounce
a) What is the lowest possible value for the spot price of gold such that there is no arbitrage?
b) Suppose the spot price of gold is $1 lower than your answer to part a. Describe how you would construct an arbitrage.
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National Finance A Chinese Perspective
Authors: Yunxian Chen, Heming Yong
1st Edition
9813360917, 978-9813360914
