Question
The right to buy crude oil for 70 USD per barrel one year from now costs $5. The right to sell crude oil for
The right to buy crude oil for 70 USD per barrel one year from now costs $5. The right to sell crude oil for 70 USD per barrel one year from now costs $4. If the continuous interest rate is 7% annual, oil storage cost for this year is $5 (prepaid now), and today oil costs $61/barrel, identify an arbitrage strategy. Explain all transactions you would need to do to lock-in riskless profit.
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Microeconomics An Intuitive Approach with Calculus
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