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a. If the spot price of gold is $980 per troy ounce, the risk-free interest rate is 6%, and storage and insurance costs are z

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Answer #1

Forward price in one year = Spot Rate(1+Interest rate)

= 980(1.06)

= $1038.80

b.Arbitrage profit = $1080 - 1038.80

= $41.2

i.e. $41

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