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What are the cash flows generated by the arbitrage strategy

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Problem - You are examining the corn market on July 1. The spot price is $5.50 per bushel and the September futures price is $6.15 per bushel. Delivery on the corn futures contract begins on September 1. You have access to a corn storage facility and you can store corn at a cost of $0.20 per bushel per month (payable at the beginning of each month). The one-month LIBOR rate is 1.5% and the two-month LIBOR rate is 1.8% (continuous compounding, expressed as annual rate). Is there an arbitrage opportunity? What are the cash flows generated by the arbitrage strategy?

Reference no: EM132842365

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