Question: 1. (10 pt each) Consider a three-month forward contract on gold. Suppose that it costs $3 per ounce per quarter to store gold with payment

1. (10 pt each) Consider a three-month forward contract on gold.

1. (10 pt each) Consider a three-month forward contract on gold. Suppose that it costs $3 per ounce per quarter to store gold with payment being made at the beginning of each quarter. Assume that the spot price is $400 per ounce and the risk-free rate is 6%(4). (a) What is the theoretical forward price that avoids artibrage profit opportunity?? (b) What are the possible arbitrage opportunities when the forward price is $420

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