# Chapter 4 - The spot price of silver is currently

Question # 00845748 Posted By: wildcraft Updated on: 09/13/2023 09:13 PM Due on: 09/14/2023
Subject Economics Topic General Economics Tutorials:
Question

Chapter 4

In this assignment, you will solve problems on pricing forwards and futures.

### Instructions

1. Use your textbook to answer the following questions from Chapter 4:
1. Exercise 9 and 13.
3. Please, use the full computing power of Excel.

Questions

9. The spot price of silver is currently \$7.125/oz, while the two- and five-month forward prices are \$7.160/oz and \$7.220/oz, respectively.

(a) If silver has no convenience yield, what are the implied repo rates?

(b) Suppose silver has an active lease market with lease rate ? = 0.5% for all maturities expressed in annualized continously compounded terms. Using the formula developed in Question 3, identify the implied repo rate for maturities of two months and five months.

13. There is an active lease market for gold in which arbitrageurs can short or lend out gold at a lease rate of ? = 1%. Assume gold has no other costs/benefits of carry.

Consider a three-month forward contract on gold.

(a) If the spot price of gold is \$360/oz and the three-month interest rate is 4%, what is the arbitrage-free forward price of gold?

(b) Suppose the actual forward price is given to be \$366/oz. Is there an arbitrage opportunity?

If so, how can it be exploited?

Tutorials for this Question
1. ## Solution: Chapter 4 - The spot price of silver is currently

Tutorial # 00841216 Posted By: wildcraft Posted on: 09/13/2023 09:14 PM
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