Question
The price of gold is currently $500 per ounce. The forward price for delivery in 1 year is $560. An arbitrageur can borrow money at
The price of gold is currently $500 per ounce. The forward price for delivery in 1 year is $560. An arbitrageur can borrow money at 8% per annum. What should the arbitrageur do? What is the arbitrageur's net profit? Assume that the cost of storing gold is zero and that gold provides no income.
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Financial Markets And Institutions
Authors: Jeff Madura
6th Edition
0324162618, 978-0324162615
