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What range of one-year forward prices of gold does mr brown

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Reference no: EM132701319

Problem 1: Mr. Brown is an investment banker who holds gold as part of a long-term investment asset in his portfolio. Mr. Brown can buy gold for USD 1500 per ounce and sell gold for USD 1498 per ounce. Mr Brown can borrow funds at 6% per year and invest funds at 5.5% per year. (Both interest rates are expressed with annual compounding.) For what range of one-year forward prices of gold does Mr. Brown have no arbitrage opportunities? Assume there is no bid-offer spread for forward prices.

Reference no: EM132701319

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