The price of gold is currently $1,200 per ounce. Forward contracts are available to buy or sell
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The price of gold is currently $1,200 per ounce. Forward contracts are available to buy or sell gold at $1,400 per ounce for delivery in one year. An arbitrageur can borrow money at 5% per annum. What should the arbitrageur do? Assume that the cost of storing gold is zero and that gold provides no income.
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The arbitrageur should buy gold at the spot price borrow money to finance the purchase and sell the ...View the full answer
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Related Book For
Fundamentals Of Futures And Options Markets
ISBN: 9781292422114
9th Global Edition
Authors: John Hull
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