What is the correct theoretical futures price

Assignment Help Finance Basics
Reference no: EM132180124

Question - The current spot price of gold is $1,315 per ounce. The 11-month risk free rate is 0.75% (annualized, continuously compounded). Your broker quotes you an 11-month futures contract at $1,391. Assume storage costs are $0.23 monthly per ounce, paid at the end of the storage period. What is the correct theoretical futures price? What is the arbitrage trade/profit using the price you were quoted?

Reference no: EM132180124

Questions Cloud

How much would you expect your call option to sell : There was 50/50 chance of price going in the future to 100 or 120, how much would you expect your call option (at 105) to sell for
Discuss the use of computers in policing : You can blog on any of the following topics: Police and Arrest, Search and Seizure and Custodial Interrogation procedures. The use of Computers in Policing.
Review trial court determinations : The "clearly erroneous" standard is applied here, as it is in many cases where appellate courts review trial court determinations.
Forecast when developing action plan : Why is it so important to include a time frame or forecast when developing an action plan?
What is the correct theoretical futures price : Assume storage costs are $0.23 monthly per ounce, paid at the end of the storage period. What is the correct theoretical futures price
Discuss strategic analysis decisions in the next five years : Discuss strategic analysis decisions in the next five years, what we need to watch out for in the information technology (IT) field, and how these decisions.
How the issues may be mitigated : What are your thoughts as CEO of the concept and the associated steps in designing an effective "strategic control system"? Please thoroughly discuss.
What is the appropriate price or yield to maturity : You need to value a series of bonds, with maturities ranging from 1 to 50 years. What is the appropriate price or yield to maturity for each of the bonds below
How did this enhance their direct mail strategy : How did this enhance their direct mail strategy? Explain in your words the Strategic Management Process.

Reviews

Write a Review

Finance Basics Questions & Answers

  Would a country welcome a balance-of-payments deficit

Under what conditions would a country welcome a balance-of-payments deficit? When would it not want a deficit?

  An example of how to calculate the tax liability using the

another client ms. dunham has asked you to help her understand how her tax is computed. you need to provide ms. dunham

  Description of capital structure decisions

The Congress Company has identified two methods for producing playing cards. One method involves using a machine having a fixed cost of $10,000 and variable costs of $1.00 per deck of cards.

  Set up the balance sheet

Demonstrate the Cash book, Journal passages and set up the Balance sheet of the organization.

  How much is the bond worth today

A corporation bond will pay $4,500 ten years from now. If the going interest rate on safe 10-year bonds is 4.25% how much is the bond worth today?

  What is the current stock price according to the growth

The Belgium Bike Company just paid an annual dividend of $1.12. If you expect a constant growth rate of 4% and have a reqquired rate of return of 13%, what is the current stock price according to the constant growth dividend model?

  Matta corporation stock currently sells for 72 per share

matta corporation stock currently sells for 72 per share. the market requires an 11 percent return on the firms stock.

  Optimize the value of the cash

A _________ is a necessary step that allows the organization to determine how to optimize the value of the cash being generated by its operations.

  What rate of return would she have earned for the past year

If Janet sold the bond today for $1,046.91, what rate of return would she have earned for the past year?

  How much bank financing is needed to eliminate the past-due

the raattama corporation had sales of 3.5 million last year and it earned a 5 percent return after taxes on sales.

  Evaluate the relative investment attractiveness

Evaluate the relative investment attractiveness of two optional common stock investments. - Choose a pair of companies from the list below.

  Concludion of some possibly difficult negotiations

The formulation of the export sales contracts represents the concludion of some possibly difficult negotiations. Discussion two items that should be included

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd