The price of gold is currently 1200 perounce forward, Ask an Expert

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The price of gold is currently $1,200 perounce. 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 10% per annum. Assume continuous compounding. -Clearly outline the trading strategy to exploit the profitable arbitrage opportunity, if any. What is the profit (per ounce)? - How does your answer change if storage costs of 2% per annum are incurred? What is the profit (per ounce)?

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Financial Management, Finance

Category:- Financial Management
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