Parity Relationships and Arbitrage
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7. The following prices are observed. Formulate an arbitrage strategy to profit from the
situation.
? London gold price per ounce is 150 spot and 154.50 for 180-day forward.
? London Dollar exchange rate is .50 spot and .48 for 180-day forward.
? U.S. interest rate is 5.00% compounded daily.
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7. An arbitrage to take advantage of this involves the following steps:
a. Borrow ...
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