Consider a long forward contract to buy 1 ounce of gold. The gold spot price is $2000.00 per ounce. The storage cost of gold is 10$ to be paid in 3 months. The contract matures in 6 months. Assume that the annual effective interest rate is equal to 3%. Answer the following two questions:

Suppose that the forward price for the contract observed in the market is $2048.00. Which of the following describes an arbitrage strategy most accurately?

a.

Today take a long position in the forward contract to buy 1 ounce of gold in 6 months, sell 1 ounce of gold and invest $2009.93 for 6 months in T-bills. In 6 months close your position in the forward contract by using your position in T-bills.

b.

Today take a short position in the forward contract to sell 1 ounce of gold. In 6 months close your position in the forward contract.

c.

Today take a long position in the forward contract to buy 1 ounce of gold, In 6 months close your position in the forward contract.

d.

Today take a short position in the forward contract to sell 1 ounce of gold, buy 1 ounce of gold. In 6 months close your position in the forward contract and pay the debt in the amount of $2029.78.

e.

Today take a short position in the forward contract to sell 1 ounce of gold in 6 months, borrow $2000 for 6 months and buy 1 ounce of gold. In 3 months borrow 10$ and pay for the storage. In 6 months close your position in the forward contract and pay the debt in the amount of $2039.85.