Economics Homework Help

Lending Fee and Interest Rates Monthly Compounding Questions

 

I need support with this Finance question so I can learn better.

  1. Find an arbitrage opportunity using the spot and future prices of Gold .
  2. How would your answer to previous question change if you can lend/borrow at interest rates of 2% p/a (monthly compounding)
  3. How would your answer to question Q.1.1 change if you can lend/borrow at interest rates of 2% p/a (monthly compounding)

and you have to pay for borrowing Gold a lending fee of 2% p/a (monthly compounding).

4. (HARD)Assuming that there are no arb. Opportunities, calculate the interval of lending rates as implied by the futures prices.

Remember , you pay a 2% p/a lending fee (monthly compounding) if you borrow Gold.