Suppose the spot price of a bushel of wheat is \(\$ 2.00\), the annual storage cost is \(\$ 0.30\) per/bushel, the risk-free rate is \(8 \%\), and the costs of transporting wheat from the destination point specified on the futures contract to a local grain elevator, or vice versa, is \(\$ 0.01 / \mathrm{bu}\).

a. Use the cost-of-carry model to determine the equilibrium price of a September wheat futures contract (expiration of \(T=\) 0.25 ).

b. Explain the arbitrage strategy an arbitrageur would pursue if the September wheat contract is trading at \(\$ 2.16 / \mathrm{bu}\).