Expectation of holding the gold for period of one year

Assignment Help Financial Management

Reference no: EM131130990

Jim Lytle, a financial adviser, recommends that his clients invest in gold. Specifically, he is advising a client to invest $100,000 to purchase 175 ounces of gold bullion, with the expectation of holding the gold for a period of one year before selling it. The client points out that the futures price for 175 ounces of gold to be delivered in one year is $104,000, which represents a 4% return on the $100,000 investment, while the one-year Treasury yield is currently 5%. “Wouldn’t it be better,” the client asks, “if I sold 175 ounces of gold today for $100,000, while purchasing a forward contract to purchase the gold in one year at a price of $104,000? I could then invest the $100,000 in 5% Treasury bonds maturing in one year.”

Reference no: EM131130990

Questions Cloud

State the social issue you have strong beliefs about : Write a Formal Proposal (minimum of seven pages, including the cover page) - imagine that you own a company that has been asked to provide a proposal to solve a problem in your local community.

Write a thesis paper on given topic : write a thesis paper:- about the similarities between prophecy at Mari and prophecy in ancient Israel.

Discuss the principles and purpose of advocacy : Discuss the principles and purpose of advocacy. Discuss how advocacy affects social change. Include two to three examples of advocacy and how they have affected social change.

Discuss the historic role of technological change : Discuss the historic role of technological change over the past 30 years and how this change has contributed to the growth of Apple and other businesses like it. Base your response on what you have read in your text and from your learning activiti..

Expectation of holding the gold for period of one year : Jim Lytle, a financial adviser, recommends that his clients invest in gold. Specifically, he is advising a client to invest $100,000 to purchase 175 ounces of gold bullion, with the expectation of holding the gold for a period of one year before sell..

The stochastic process defined : Let {Y(t), t ≥ 0} be the stochastic process defined in Question no. 21. (a) Calculate the distribution of Y(1 )+ Y(2).

What are the ethical issues in this case : The company already has considerable debt. Raising additional debt will be costly, will adversely affect Galena's credit rating, and will increase the company's reported losses due to the growth in interest expense.

Position of investment risk measurement : Discuss the main difference between Treynor's position of investment risk measurement and that of Sharpe and use your answer to deduce the equation of the CAPM in each.

Identify a practice that has an impact on the environment : Identify a practice that has an impact on the environment and explain how the possession or lack of virtue may make a difference to how one conducts oneself within that practice with respect to that environmental impact.

User Account

All Pages