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The spot price of silver is $30 per ounce. The interest rate is 6 percent per year. The quoted six-month forward price for silver is
The spot price of silver is $30 per ounce. The interest rate is 6 percent per year. The quoted six-month forward price for silver is $31.
1) What should be the arbitrage-free forward price for silver for a forward contract maturing in six months?
2) Demonstrate how you can make arbitrage profits in this market.
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