1.It is now in January. The current interest rate is 5%. The June futures price for gold is $930.00, whereas in December futures price is $960.00. Briefly describe the transactions necessary to take advantage of this specific arbitrage opportunity and calculate the arbitrage profit. (15 marks)

2.It is now in January. The current interest rate is 5%. The June futures price for gold is $946.30, whereas in December futures price is $960.00. Briefly describe the transactions necessary to take advantage of this specific arbitrage opportunity and calculate the arbitrage profit. (15 marks)

3.A financial analyst has identified an arbitrage opportunity for a stock:

Spot price $105

Futures price expiring in 1 year $106

Interest rate for 1 year 2%

Dividend per share$3

Stocks per lot 100

Briefly the transactions necessary to take advantage of this specific arbitrage opportunity and calculate the arbitrage profit. (10 marks)

Answer rating: 100% (QA)

1 Arbitrage Opportunity Gold Futures June vs December Transactions 1 Borrow money at the current int... View the full answer