Suppose you observe that both the current price and 1-year forward price for copper are $3.00 and that are effective annual interest rate is 10%. For some reasons market participants could rationally believe that the copper price in 1 year will be $3.00. From the concept of financial forwards, you might think that future price should be 1.10 x $3.00 = $3.30, the future value of the current copper price would therefore create an arbitrage opportunity.
If the forward price were $3.00, you could buy copper forward and short sell copper today. If the copper forward price is $3.00, it seems that you make a profit of $0.30 per pound of copper.
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