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Suppose we know the following information: the spot price of oil is USD 100; the quoted 1-year futures price of oil is USD 102; The

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Suppose we know the following information: the spot price of oil is USD 100; the quoted 1-year futures price of oil is USD 102; The 1-year USD interest rate is 3% per annum (annual compounding); the storage costs of oil are 1% per annum (paid at the end of the period). Describe the arbitrage opportunity from the above information, and show your arbitrage profit and how you get it. AM

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