What is the equilibrium price of gold futures

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On May 10th, 2012, the gold spot price was $1,580/oz and the 9-month risk-free interest rate was 2% (annualized), Assume the cost of storage and insurance of gold is $100/oz payable on February 7th, 2013. Use actual/actual day count method and simple interest method.

a) What is the equilibrium price of gold futures on May 10th, 2012 for delivery in 273 days, February 7th, 2013?

b) If the futures price is $1,800, how can you create a arbitrage profit making strategy? What is the amount of arbitrage profit?

a)Futures Price (equil) b)Amount of profit Show your calculation below

Reference no: EM132632745

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