11) A bid-ask spot price of a consumption asset is $1000 - $1020 and its...
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11) A bid-ask spot price of a consumption asset is $1000 - $1020 and its bid-ask 7-month forward price is $1040-$1050. Assume there are no storage costs. Assume also you can borrow and invest at the same interest rate. Find the range of interest rates that results in arbitrage opportunity
12) Find your expected profit 11 months from now from buying an 11-month forward contract on the stock market index. The current value of the index is 5000, the contract is for $1 time the index, the index does not pay dividends, 11-month zero rate is 2% and the expected market rate of return is 8%
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