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Suppose you are an arbitrageur. Your parent company owns storage facilities that you can rent for your own use (you need to pay) or you
Suppose you are an arbitrageur. Your parent company owns storage facilities that you can rent for your own use (you need to pay) or you can rent it out to other people. The spot price of gasoline is 210 cents per gallon (cpg), the one-year forward price is 217 cpg, the interest rate is 3% per annum cont. comp., the present value of storage is 30 cpg, and the convenience yield is 0%
If arbitrage is possible, how much would you make per gallon traded?
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