The Only Significant Cost of Storing Gold Is the Interest

question 110

Essay

The only significant cost of storing gold is the interest on the money you have tied up in it.Suppose you can borrow money at 10% to buy gold and that today's price of gold is $460 per troy ounce.Gold futures contracts are available now.The future for delivery in six months is at $480,and the future for delivery in twelve months is at $506.Devise two ways you might exploit this situation to make an excess profit.Are there risks involved?

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Definitions:

Labor Hours

The total number of hours worked by employees within a specific time period, often used to measure productivity or to calculate labor costs.

Production Department

A division within a company responsible for the actual manufacturing or creation of goods and services.

Labor Constraint

Restrictions or limitations on the availability or use of workers that can affect production or service delivery.

Linear Optimization

A mathematical method for determining the best allocation of limited resources to achieve maximum profit or minimum cost, under a set of linear relationships.