The current spot price of platinum is 1500 in us dollars

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The current spot price of platinum is 1500 (in US dollars per troy ounce). Assume a continuously compounded risk-free rate of interest of 5% p.a. and ignore storage costs.

(a) Find the one-year forward price of platinum, assuming that there are no arbitrage opportunities.

(b) Suppose that someone is willing to enter into a long one-year forward contract for platinum at $1600 per ounce. Construct a strategy from which an investor can obtain a riskless profit.

 

Reference no: EM13477254

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