please show work 1) Gold is trading at $1400, but one...
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1) Gold is trading at $1400, but one year Gold contracts are trading at $1100 The CME defines the Gold contract as 100 ounces/c. S/c. $10,000 $8.000. Your commodities broker quotes you SD/ounce storage and insurance $600/ounce borrowing fee on gold, and 5.0% on cash balances - all per annum. JQ Investor decides to arbitrage this price difference using 300 ounces of Gold JQ Must (BUY / SELL) gold and (BUY/SELL) a total of gold contracts. if JQ takes this arbitrage right to delivery he will make a profit (loss) of The cost of carry is s lounce The futures price at which arbitrage is no longer profitable is s
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