A 1-year gold futures contract is selling for $1,645. Spot gold prices are $1,592 and the 1-year risk-free rate is 3%.
The arbitrage profit implied by these prices is ________.

Name: A 1-year gold futures contract is selling for $1,645. Spot gold prices are $1,592 and the 1-year risk-free rate is 3%. The arbitrage profit implied by these prices is ________.
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Question

Quizplus · Accepted Answer

Parity F₀ = S₀(1 + r_f− d)^T = $1,592(1 + 0.03 − 0)¹ = $1,639.76 The arbitrage profit is $1,645 − 1,639.76 = $5.24

A 1-Year Gold Futures Contract Is Selling for $1,645