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.

$($a$)$ What is the forward price F $(0,1)$ that does not result in arbitrage profit?

$($b$)$ If the forward price is $$460,$ do you get any arbitrage profit opportunity? If so$,$ what

is your strategy? $($You need to provide more than $$buy low, sell high$.)$