# (SOLVED) Jason’s Food requires 50 tones of frozen cattle meat for its food catering on 1st December 2022. As of today 1st April 2022 the frozen cattle meat spot is selling at \$20,000 per tone.

Discipline: Finance

Type of Paper: Question-Answer

Academic Level: Undergrad. (yrs 1-2)

Paper Format: APA

Pages: 1 Words: 37

Question

Jason’s Food requires 50 tones of frozen cattle meat for its food catering on 1st December 2022. As of today 1st April 2022 the frozen cattle meat spot is selling at \$20,000 per tone. The risk free interest rate for all maturities is 12% p.a. The storage cost of frozen meat is \$600 per tone for every four months to be paid at the end of each period. The frozen cattle meat supplier quoted the 1st December 2022 forward price to be \$23,000 per tone.

Calculate the arbitrage profit for each ton of frozen cattle meat (if any).

A. \$0.00

B. \$722.01

C. \$734.26

D. \$2,400.00

Expert Solution Preview

 storage cost 600 interest rate 12% Number of month 4 present value 576.4736635