Lending Fee and Interest Rates Monthly Compounding Questions
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- Find an arbitrage opportunity using the spot and future prices of Gold .
- How would your answer to previous question change if you can lend/borrow at interest rates of 2% p/a (monthly compounding)
- 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.
