Economics Homework Help

Arbitrage question

Assume that today is 5/11/2020and thatyou can lend/borrow at interestrates of 1% p/a (monthly compounding)

Below is the table with gold prices for May 2020 and May 2021

Find anarbitrage opportunity using the spot and future prices of Gold.
How would your answer to previous question change if you can lend/borrow at interestrates of 2% p/a (monthly compounding)
How would your answer toquestionQ.1.1 change if you can lend/borrow at interestrates of 2% p/a (monthly compounding)
(HARD)Assuming that there are no arb. Opportunities, calculate theinterval oflending ratesas implied by the futures prices.

and youhave to pay for borrowingGold a lending fee of2% p/a (monthly compounding).

Remember , youpay a 2% p/a lending fee (monthly compounding) if you borrow Gold.

Solution:

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