Question
Now that you have decided whether to borrow in cash or gold, you have decided not to follow Steves advice, and will start speculating on
Now that you have decided whether to borrow in cash or gold, you have decided not to follow Steves advice, and will start speculating on the price of platinum. Looking at the platinum market you see you can buy platinum for $1,400 an ounce and can sell platinum for $1,380 an ounce. Looking at the interest rate markets, you also see that you can borrow cash at 7.2% p.a. and invest cash at 5.7% p.a. (both interest rates are continuously compounded). Further the storage costs of platinum are 2% p.a. continuously compounded. Given this information, what would the twoyear forward prices on platinum need to be for there to be arbitrage opportunities available in this market?
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