In the Hull book, i saw the following exercice and its answer :
Suppose the one-year gold lease rate is 1,5% and the one-year risk-free rate is 5%. Both rates are compounded annually. Calculate the maximum one-year forward price Goldman Sachs should quote for gold when the spot price is 1200€.
Goldman Sachs can borrow 1 ounce of gold and sell it for 1200€. It invests the 1200€ at 5% so that it becomes 1260€ at the end of the year. It must pay the lease rate of 1,5% on 1200€. This is 18€ and leaves it with 1242€. It follows that if it agrees to buy the gold for less than 1242€ in one year it will make a profit.
In the point of view of the gold company, wouldn't it better to just sell the gold now, invests at 5% and get 1260€ instead of receiving 1242€ ? More generally, what kind of "arbitrage" the gold company could do ?