$1-$year futures price of gold is Rs$.500/$g$.$ What should be the $2$ year futures price of gold assuming an annual interest rate of $10\%$ and there are no transaction costs? If a $2$ year future's price on gold is Rs$.560/$g$,$ what kind of arbitrage opportunity arises and how are you going to earn that arbitrage profit? If a $2-$year futures price on gold is Rs$.540/$g$.$ what kind of arbitrage opportunity arises and how are you going to earn that arbitrage profit $?$

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To calculate the 2year futures price of gold with an annual interest rate of 10 and no transaction c... View the full answer