7. Lecture Note 2) Consider a 6-month forward contract on gold. The current spot price is $1,000 per ounce and the annual continuously compounded risk-free interest rate is 5%. Assume storage costs and the convenience yield are zero. Answer the following questions. a. Compute the no-arbitrage forward price of gold for a 6-month forward contract. Round your answer to two places after the decimal place, e.g. 1.0153 rounds to 1.02. b. Suppose you can borrow money at 8 percent per year with monthly compounding and can lend money at 4.5 percent per year with monthly compounding. Compute the continuously compounded borrowing and lending rates. Round your answer to four places after the decimal place, e.g., 0.076562 rounds to 0.0766 or 7.66%. c. Suppose the actual quoted forward price for a 6-month contract is $1,027.50 per ounce of gold. Explain whether there is an arbitrage opportunity. If one does exist, use an arbitrage table to demonstrate how you can make a riskless arbitrage profit. The arbitrage table should have the following column titles: "Transaction", "Payoff (now)", and "Payoff (6 months)". 7. Lecture Note 2) Consider a 6-month forward contract on gold. The current spot price is $1,000 per ounce and the annual continuously compounded risk-free interest rate is 5%. Assume storage costs and the convenience yield are zero. Answer the following questions. a. Compute the no-arbitrage forward price of gold for a 6-month forward contract. Round your answer to two places after the decimal place, e.g. 1.0153 rounds to 1.02. b. Suppose you can borrow money at 8 percent per year with monthly compounding and can lend money at 4.5 percent per year with monthly compounding. Compute the continuously compounded borrowing and lending rates. Round your answer to four places after the decimal place, e.g., 0.076562 rounds to 0.0766 or 7.66%. c. Suppose the actual quoted forward price for a 6-month contract is $1,027.50 per ounce of gold. Explain whether there is an arbitrage opportunity. If one does exist, use an arbitrage table to demonstrate how you can make a riskless arbitrage profit. The arbitrage table should have the following column titles: "Transaction", "Payoff (now)", and "Payoff (6 months)