If the spot price of gold is $ 1500 per troy ounce, the risk- free interest rate
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If the spot price of gold is $ 1500 per troy ounce, the risk- free interest rate is 4 percent, and storage and insurance costs are zero, what should the forward price of gold be for delivery in one year? Use an arbitrage argument to prove your answer, and include a numerical example showing how you could make risk- free arbitrage profits if the forward price exceeded its upper-bound value.
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Related Book For
Investments
ISBN: 978-0071338875
8th Canadian Edition
Authors: Zvi Bodie, Alex Kane, Alan Marcus, Stylianos Perrakis, Peter
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