, 02.12.2019 18:51 michael11948

# The current gold price for immediate delivery (i. e., gold spot price) is \$1440 (bid) and \$1450 (ask) per ounce. a one-year forward contract of gold trades at a forward price of \$1500 (bid) and \$1510 (ask) per ounce. in a long forward contract you will receive delivery of one ounce of gold in one year and you will need to pay \$1510 at the time of delivery. alternatively, in a short forward position you will need to deliver one ounce of gold in one year and you will receive \$1500 at the time of delivery. your one-year lending interest rate is 1% and your one-year borrowing interest rate is 3%. assume that gold has no delivery costs, no storage costs, and no short-selling costs. you expect that the gold price is going to increase to around \$1600 over the next year. are there any arbitrage opportunities here? if yes, explain which transactions you need to perform and quantify the profits you make from this arbitrage. if not, explain why an arbitrage does not exist.

### Another question on Business

Consider how health insurance affects the quantity of health care services performed. suppose that the typical medical procedure has a cost of \$160, yet a person with health insurance pays only \$40 out of pocket. her insurance company pays the remaining \$120. (the insurance company recoups the \$120 through premiums, but the premium a person pays does not depend on how many procedures that person chooses to undergo.) consider the following demand curve in the market for medical care. use the black point (plus symbol) to indicate the quantity of procedures demanded if each procedure has a price of \$160. then use the grey point (star symbol) to indicate the quantity of procedures demanded if each procedure has a price of \$40. q d at p=\$160 q d at p=\$40 0 10 20 30 40 50 60 70 80 90 100 200 180 160 140 120 100 80 60 40 20 0 price of medical procedures quantity of medical procedures demand if the cost of each procedure to society is truly \$160, the quantity that maximizes total surplus is procedures. economists often blame the health insurance system for excessive use of medical care. given your analysis, the use of care might be viewed as excessive because consumers get procedures whose value is than the cost of producing them.