What would be futures price of six month maturity futures

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Reference no: EM131916215

Consider an investor holding 100 oz of gold who is short one gold futures contract. Suppose that gold today sells for $1,650 an ounce, and the futures price for September delivery is $1,655 an ounce. Suppose that the next day the spot price increased to $1,653 while the futures price increased to $1,657.50. Calculate the investor's gains/losses. What would be the increase/decrease in the basis per an ounce?

a) Suppose that gold currently sells for $1,650 an ounce. If the risk-free interest rate is .5% per month, what would be the futures price of a six month maturity futures.

b) Suppose that the six month aturity futures price in (a) above were $1,678 rather than the appropriate answer mentioned in (a) above. What kind of arbitrage will the investor initiate? Show your actions, based on initial cash flows and the cash flows 6 months from now.

Reference no: EM131916215

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