Suppose the current spot price of wheat is $10/ bushel while the futur

QUESTION

Suppose the current spot price of wheat is $10/ bushel while the futures price for wheat with delivery date of 1 year form now is $15/ bushel. If there are no storage costs and the current one-year interest rate is 5%, construct an arbitrage that would generate profits.
Suppose the current spot price of wheat is $10/ bushel while the futures price for wheat with delivery date of 1 year form now is $15/ bushel. If there are no storage costs and the current one-year interest rate is 5%, construct an arbitrage that would generate profits current spot price of wheat is¦

0/ bushel date of 1 year form now is============= $15/ bushel one-year interest rate is================ 5% pyaback ”””” 10.50 dollars generate profits= $15/ bushel -10.50 dollars = 4.50 dollars -answer

ANSWER:

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