Question
Question 4 (Final 2011: 10 points) (a) (3 points) The spot price for gold is $650. The risk-free interest rate is 5%. What is the
Question 4 (Final 2011: 10 points)
(a) (3 points) The spot price for gold is $650. The risk-free interest rate is 5%. What is the futures price for gold for a six-month contract?
(b) (5 points) The six-month futures price in the market is $682.50. Is there an arbitrage opportunity here? Why? If so how would you exploit it? Explain.
(c) (2 points) Consider the formula on the formula sheet:
What does c represent? What is c likely to be for gold? What about for oil? Why? Hint: I am not looking for a numerical answer here.
Question 4 (Final 2011: 10 points) (a) (3 points) The spot price for gold is $650. The risk-free interest rate is 5%. What is the futures price for gold for a six-month contract? (b) (5 points) The six-month futures price in the market is $682.50. Is there an arbitrage opportunity here? Why? If so how would you exploit it? Explain. (c) (2 points) Consider the formula on the formula sheet: Fo = P, (1+r, +c) What does 'c' represent? What is c' likely to be for gold? What about for oil? Why? Hint: I am not looking for a numerical answer here
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Options Futures And Other Derivatives
Authors: John Hull
11th Global Edition
1292410655, 9781292410654
