120 The company could enter into a long forward contract to buy 1 million Canadian dollars in six months. This would have the effect of locking in an exchange rate equal to the current forward exchange rate. Alternatively the company could buy a call option giving it the right(but not the obligation) to purchase 1 million Canadian dollar at a certain exchange rate in four months. this would provide insurance against a strong canadian dollar in four months while still allowing the company to benefit from a weak Canadian dollar at that time The arbitrageur could borrow money to buy 100 ounces of gold today and short futures contracts on 100 ounces of gold for delivery in one year This means that gold is purchased for $500 per ounce and sold for $700 per ounce. The return(%40% per annum)is far greater that the 10% cost of the borrowed funds. This is such a profitable opportunity that the arbitrageur should buy as many ounces of gold as possible and short futures contracts on the same number of ounces. Unfortunately arbitrage opportunities as profitable as this rarely arise in practice1.20 The company could enter into a long forward contract to buy 1 million Canadian dollars in six months. This would have the effect of locking in an exchange rate equal to the current forward exchange rate. Alternatively the company could buy a call option giving it the right (but not the obligation) to purchase 1 million Canadian dollar at a certain exchange rate in four months. This would provide insurance against a strong Canadian dollar in four months while still allowing the company to benefit from a weak Canadian dollar at that time. 1.21 The arbitrageur could borrow money to buy 100 ounces of gold today and short futures contracts on 100 ounces of gold for delivery in one year. This means that gold is purchased for $500 per ounce and sold for $700 per ounce. The return (%40% per annum) is far greater that the 10% cost of the borrowed funds. This is such a profitable opportunity that the arbitrageur should buy as many ounces of gold as possible and short futures contracts on the same number of ounces. Unfortunately arbitrage opportunities as profitable as this rarely arise in practice