1.Andy's Frozen requires 50 tones of frozen cattle meat for its food catering in December 2021. As...
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Question:
1.Andy's Frozen requires 50 tones of frozen cattle meat for its food catering in December 2021. As of today 1st April 2021 the frozen cattle meat is selling at $20,000 per tone. The risk free interest rate for all maturities is 12% p.a. continuously compounded. The storage cost of frozen meat is $540 per tone for every three months to be paid in advance. The frozen cattle meat supplier quoted the December forward price to be $25,000 per tone. Calculate the arbitrage profit for each tone of frozen cattle meat (if any).
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