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Size of the arbitrage profit

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Assume there are no brokerage commissions, bid-ask spreads, or other transactions costs. The risk-free borrowing and lending rates are equal. If you lend $1 for one month you will get back $1.02 at the end of the month. The current spot price of gold is $1,000 per ounce. The forward price for delivery of an ounce of gold in one months' time is $1,015. Your belief is that gold is underpriced and that gold prices will rise over the coming month. The size of the arbitrage profit per ounce of gold that you can achieve in one months' time is:

Reference no: EM132740078

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