Gold is $1200 an ounce for purchase tomorrow.
1 a The 9 month gold future is $1400 an ounce. Interest rates are 3%.
Is there an arbitrage?
What trades would you do?
What is this trade called?
b. Gold is $1300 an ounce for purchase tomorrow. Storage costs are $50 a year.
The 6 month gold future is $1200 an ounce. Interest rates are 4%.
Is there an arbitrage? Why or why not?
What trades would you do (assuming you can do them)?
What is this trade called?