A 1-year gold futures contract is selling for $1,645. Spot gold prices are $1,592 and the 1-year risk-free rate is 3%. The arbit

Question

2 years ago

9

rage profit implied by these prices is _____________.

1 answer:

stealth61 [152] · Answer 1 · 2023-11-04T16:28:41+03:00

The arbitrage profit implied by these prices is $5.24.

<h3>Arbitrage profit</h3>

Given:

Future contract= 1645

Sport gold price = 1592

Risk-free rate (rf) = .03

Hence:

Arbitrage profit=1645-[1592(1+1.03)¹]

Arbitrage profit=1645- 1639.76

Arbitrage profit=1645 =$5.24

Therefore the arbitrage profit implied by these prices is $5.24.

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