Question
Question:Answer QUESTION 1 ONLY AND SHOW FULL WORK AND EXPLANATION!! 1.Suppose that you are given with the following information on two futures contracts with identical
Question:Answer QUESTION 1 ONLY AND SHOWFULL WORKAND EXPLANATION!!
1.Suppose that you are given with the following information on two futures contracts with identical commodities in contracts;= $1.012, the per annum risk-free rate is 3.5%, where,represent the futures prices (per unit of the commodity stated) of these two contracts, respectively. Let the futures contract withhave three more months than that oftoward the maturity. Is there an arbitrage opportunity if there is one using these two futures contracts if there is no other transaction cost? Now, suppose=1.934, is there any arbitrage opportunity?
**(Notice that "arbitrage" means the transaction is risk-free with positive guaranteed profits and without any initial investment. Hence, it is different from speculation.)**
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Contemporary Business Mathematics with Canadian Applications
Authors: S. A. Hummelbrunner, Kelly Halliday, K. Suzanne Coombs
10th edition
133052311, 978-0133052312
