Suppose That Trades Now Require a Transactions Cost of $3

question 3

Multiple Choice

Suppose that trades now require a transactions cost of $3 per ounce whenever spot gold is traded,a $2 per ounce one-time fee for trading forward contracts,but no charges for trading bonds.If you have to pay transactions costs,the arbitrage profit that you can make today by trading one forward contract and other securities is:

• A) 0
• B) $4.26
• C) $2.53
• D) $7.53
• E) None of these answers are correct.

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Definitions:

Section 427

This does not specify a context from which to derive a precise definition, as it might refer to specific sections of different laws or regulations depending on the context.

Chartered Bank

A financial institution established under a specific charter granted by the government, allowing it to offer banking services.

Bona Fide Purchasers

Individuals who buy something in good faith without knowledge of any defects or claims against the item.

Mortgage Bond

A type of bond secured by a mortgage or pool of mortgages, providing specific property as collateral for the bond's obligations.