Strategy calls for selling gold in the spot market

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Today is early March. The gold futures contract is on 100 oz. of gold. You have the following price information. Assume 2 months until expiration.

May gold futures price: $702 per oz.

Spot market price for gold: $882 per oz.

Rate of interest is 2.51%/month, compounded monthly. (Example: compounding for three months: ((1 + .01)^3)

Your storage cost for gold is $0.10/oz. per month (payable in arrears).

An arbitrage opportunity exists; assume you own sufficient gold to execute it, if the strategy calls for selling gold in the spot market. If the strategy is executed with one May gold futures contract, what is the arbitrage profit (not counting transactions costs or taxes) rounded to the dollar?

Please show all work.

Reference no: EM131520440

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