An ounce of gold currently trades for $1500 in the spot market. A contract to deliver 100 ounces of gold 3 months from today currently trades at a forward price of $1522 per ounce. It will cost $2 to store 1 ounce of gold each month, payable at the end of the month. You have access to risk-free borrowing and lending at a 4% interest rate.

a) Use a replicating portfolio to derive the no-arbitrage forward price for delivery 3 months from today.

b) Based on your results in part a), there is an arbitrage opportunity. Construct a set of transactions today that costs nothing today, but generates a guaranteed positive cash flow 3 months from today. What is the total profit?