Silver has no convenience yield, and it sellf for $20 per ounce. The risk free rate is 0.15% per month. There is no dividend with silver.
1. Find 6-month maturity futures price.
2. Find 12- month maturity futures price.
3. Is the contract trading in contango or backwardation?
4. Given that the 6-month futures price for silver was $22.40, and spot is $20 as in the scenario above with risk free rate at 0.15% per month, when you construct a hedged portfolio to arbitrage the conditions, what profit would you expect to lock in?