Question: 1. (10 pt for a, 20 pt for b) Consider a one-year forward contract on gold. Suppose that it costs $2 per ounce per year

1. (10 pt for a, 20 pt for b) Consider a one-year forward contract on gold. Suppose that it costs $2 per ounce per year to store gold with payment being made at the end of the year Assume that the spot price is $450 per ounce and the risk-free rate is 7% per annum for all maturities. Assume continuous compounding. is the forward price F b. What are the possible arbitrage opportunities when the forward price is different from the one found in a

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