What steps does john needs to undertake in order to make

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If John is planning to use a forward contract to purchase 100 ounces of bronze in 2 months time. The current price of gold is 1 970 per unit. Assume that John can borrow and lend at 2.5% p.a. compounded half yearly.

Problem 1) Use the arbitrage-free pricing principle to calculate the fair forward price for gold per ounce.

Problem 2)  The forward price for purchase or sale of gold in two months time is 2 030 per unit. What steps does John needs to undertake in order to make an arbitrage profit from a forward contract on 100 units of gold in 3 months time. Outline all that needs to happen on all relevant dates, as well as today.

Problem 3) The forward price for purchase or sale of gold in two months time is 1 900 per unit. List and explain all the steps that Tom needs to undertake in order to make an arbitrage profit from a forward contract on 100 ounces of gold in two months time. Outline all that needs to happen on all relevant dates, as well as today

Reference no: EM132696415

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