Economics Homework Help

Assume that today is 5/11/2020and thatyou can lend/borrow at interestrates of 1% p/a (monthly compounding)

Below is the table with gold prices for May 2020 and May 2021

DATA : May 11,2020- closing prices
Month		Price
May-20	1723
May-21	1750

• Find anarbitrage opportunity using the spot and future prices of Gold.
• How would your answer to previous question change if you can lend/borrow at interestrates of 2% p/a (monthly compounding)
• How would your answer toquestionQ.1.1 change if you can lend/borrow at interestrates of 2% p/a (monthly compounding)
• (HARD)Assuming that there are no arb. Opportunities, calculate theinterval oflending ratesas implied by the futures prices.

and youhave to pay for borrowingGold a lending fee of2% p/a (monthly compounding).

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