Cash and carry arbitrage (vol. 5 page 205)

CFA Level III
#1

Hi Brave Ones,

Appreciate any help if possible.

READING 33 (COMMODITIY FWDS AND FUTURES) CFAI CURRICULUM, BOOK 5:

  1. Why does practice problem 3B does not include the “borrowing” part to buy the asset in the " cash and carry tableau", and in problem 1C it does?

How could one deduct this and simply assume we had the commodity at time zero?

Problem 1B (vol 5 page 203)

Problem 3B (vol 5 page 203)

Many thanks once again and keep commitment high.

#2

ERRATA: is problem 1B (considers borrowing) versus 2B (considers asset ownership)

many thanks.

#3

I believe this was discussed on the forum a long time ago. Vaguely remember reading that if “return” is asked for, do not consider the borrowing, or sth. to that effect.

#4

Thanks (once again) you CP. I will dig for it…

#5

cpk123, Can you shade some lights pls as to why not?

thnks

RS

#6

http://www.analystforum.com/forums/cfa-forums/cfa-level-iii-forum/91307359

http://www.analystforum.com/forums/cfa-forums/cfa-level-iii-forum/9926500

http://www.analystforum.com/forums/cfa-forums/cfa-level-iii-forum/91093170

#7

Thanks cpk123!

Basically, one talks about arbitrage & other talks about return.