Suppose the following conditions are present:

- The forward price on the March lumber contract is \(f_{T 1}=\) \(\$ 0.24 / \mathrm{sq}\). ft.

- The March forward interest rate on a three-month loan is \(8 \%\) (annual).
- The storage costs for lumber is \(\$ 0.06 /\) sq. ft. per year.

- The carrying-costs benefits and the costs of transporting lumber are zero (assume there is a storage facility at the location point specified on the lumber forward contract).

- The time period between the expiration on a June lumber contract and the March contract is \(T_{2}-T_{1}=0.25 /\) year.

a. Using the carrying-cost model, determine the equilibrium price on the June contract.

b. Explain the arbitrage strategy an arbitrageur would pursue if the June contract were trading at \(\$ 0.30 /\) sq. ft.