A trader owns gold as part of a long-term investment portfolio. The trader can buy gold for $450 per ounce and sell it for $449 per ounce. The trader can borrow funds at 6% per year and invest funds at 5.5% per year (both in continuous compounding). For what range of 1-year forward prices of gold does the trader have no arbitrage opportunity? Assume there is no bid—offer spread for forward prices and no storage cos for gold. Jie Zhu.

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