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Exploit an arbitrage opportunity

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An investor observes that the price of a nine-month gold futures in the market is $24 per ounce. The current spot price of gold is $20 per ounce. The storage cost is $0.5 per ounce paid at expiration. Assuming that interest rate is 10%. Describe actions he could take to exploit an arbitrage opportunity and calculate the resulting profit per ounce (showing cash flows at time 0 and T).

Reference no: EM132579678

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