Suppose the gold spot price is $300/oz, the 1-year forward price is 310.686, and the continuously compounded
Question:
a. What is the lease rate?
b. What is the return on a cash-and-carry in which gold is not loaned?
c. What is the return on a cash-and-carry in which gold is loaned, earning the lease rate?
For the next three problems, assume that the continuously compounded interest rate is 6% and the storage cost of widgets is $0.03 quarterly (payable at the end of the quarter). Here is the forward price curve for widgets:
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Year 0 Year 1 Year 2 Dec. Mar. June Sept. D M June 3.000 3.075 3.152 2.750 2.822 2.894 2.968
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a The spot price of gold is 30000 per ounce With a continuously compounded annual ...View the full answer
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