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One-year futures price of silver

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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.

  1. What is the "fair" one-year futures price of silver? What is the cost of carry?
  2. How can you make an arbitrage profit? Show your transactions in details using a numerical example.

Reference no: EM131238248

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