Question
Platinum is trading at $1300, but one year Platinum contracts are trading at $1000. NYMEX defines the Platinum contract as 50 ounces/c, $/c, $10,000, $8,000.
Platinum is trading at $1300, but one year Platinum contracts are trading at $1000.
NYMEX defines the Platinum contract as 50 ounces/c, $/c, $10,000, $8,000. Your commodities broker quotes you $16/ ounce storage and insurance, $500/ounce borrowing fee on platinum, and 1.5% on cash balances - all per annum.
JQ Investor decides to arbitrage this price difference using 350 ounces of Platinum
JQ must(BUY? / SELL?)platinum and (BUY? / SELL?) a total of___?___ platinum contracts.
If JQ takes this arbitrage right to delivery he will make a profit (loss) of $___?___
The cost of carry is $___?___/ounce
The futures price at which arbitrage is no longer profitable is $___?___
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Foundations Of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
11th Canadian Edition
1259024970, 978-1259265921
