A one-year gold futures contract is selling for $1,558. Spot gold prices are $1,500 and the one-year

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A one-year gold futures contract is selling for $1,558. Spot gold prices are $1,500 and the one-year risk-free rate is 2%.

a. According to spot-futures parity, what should be the futures price? 

b. What risk-free strategy can investors use to take advantage of the futures mispricing, and what will be the profits on the strategy?  

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Related Book For  book-img-for-question

ISE Essentials Of Investments

ISBN: 9781265450090

12th International Edition

Authors: Zvi Bodie, Alex Kane, Alan Marcus

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