Currently, the spot price of silver is $9 per ounce and the one-year futures price of silver is $11. The storage costs are $0.24 per ounce per year payable at the end of the year. Assume the simple interest rate is 10% per annum.
- What is the "fair" one-year futures price of silver? What is the cost of carry?
- How can you make an arbitrage profit? Show your transactions in details using a numerical example.