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Today the underlying spot price is 500, and all costs of storing and insuring the underlying is 50. With an interest rate of 5%, If
Today the underlying spot price is 500, and all costs of storing and insuring the underlying is 50. With an interest rate of 5%, If the forward price for a one-year forward contract is 560, you could make an arbitrage profit per arbitrage portfolio (one unit of the underlying asset etc.) by which arbitrage strategy? Hint: Figure out theoretical forward price, then arbitrage portfolio, then check with an arbitrage table!
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