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Identify an arbitrage opportunity

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Reference no: EM133070839

Assume you have observed the following information for a commodity:

Spot price for commodity  

$150

Forward price for expiring in 1 year

$162

Interest rate for 1 year

5% p.a. semi-annual compounding

Storage cost  

$1.5 p.a. payable semi-annually in arrears

Given the above information, if you identify an arbitrage opportunity, present your strategy to take it. If you believe there might not be an arbitrage opportunity, explain why.

Reference no: EM133070839

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