Question: 1 the spot market price of gold is 131490 per...
1. The spot market price of gold is $1314.90 per ounce. An investor believes the price will increase to $1340 within the next three months. If the expectation turns out to be correct, what return will the investor realize (in dollars and in percent)
a. if the investor purchases 100 ounces of gold in the spot market?
b. if the investor enters a long 3-month forward contract for 100 ounces of gold with a forward price of $1321.60?
c. if the investor pays $17.35 to purchase a 3-month call option on 100 ounces of gold with a strike price of $1320.00?
d. if the investor enters a long 3-month futures contract for 100 ounces of gold with a futures price of $1321.60? Assume the required margin is $3400.
e. What will the investor’s return (in dollars and percent) be in each part of the prior question if the spot price of gold in 3 months is $1325?