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Question
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%.
Based on the above data, which of the following set of transactions will yield positive riskless arbitrage profits?
A. Buy gold in the spot with borrowed money, and sell the futures contract.
B. Buy the futures contract, and sell the gold spot and invest the money earned.
C. Buy gold spot with borrowed money, and buy the futures contract.
D. Buy the futures contract, and buy the gold spot using borrowed money.
Answer
This answer is hidden. It contains 151 characters.
Related questions
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Which of the following does not approximate the performance of a buy-and-hold portfolio strategy?
A. An equally weighted index
B. A price-weighted index
C. A value-weighted index
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Q:
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Q:
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Q:
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Q:
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Q:
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Q:
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Q:
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Q:
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Q:
You manage a $15 million hedge fund portfolio with beta = 1.2 and alpha = 2% per quarter. Assume the risk-free rate is 2% per quarter and the current value of the S&P 500 Index is 1,200. You want to exploit the positive alpha, but you are afraid that the stock market may fall and you want to hedge your portfolio by selling 3-month S&P 500 future contracts. The S&P contract multiplier is $250.
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D. The answer cannot be determined from the information given.