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What is the range of the forward price

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A trader holds gold for long-term investment. The trader can buy gold for $1020/ounce and sell gold for $1015/ounce. The trader can borrow funds at 5% and lend funds at 4.5%. (Both interest rates are per annum with continuous compounding.) Storage cost if $3/ounce per year, payable immediately when you buy the gold in the spot market. Consider a 1-year forward contract on gold. What is the range of the forward price F0, for which the trader has no arbitrage opportunities?

Reference no: EM133068035

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