Illustrtae what should the arbitrageur do

Reference no: EM1332503

The answer to Arbitrage

The price of gold is currently $700 per ounce. Forward contracts are available to buy or sell gold at $900 for delivery in one year. An arbitrageur can borrow money at 10% per annum. What should the arbitrageur do? Assume that the cost of storing gold is zero and that gold provides no income.

Reference no: EM1332503

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