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What should the arbitrageur do

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Problem 1: The price of gold is currently trading at $1,950 per ounce. The forward price for delivery in one year is $2,100. An arbitrageur can borrow money at 6.5% per annum. Assume there are no storage costs and that gold provides no income. What should the arbitrageur do if he wants to take advantage of the mispricing by investing in 100 ounces of gold?

Reference no: EM132940970

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