Given: At t = 0, the price of gold is $1,000 per ounce

r0,1 = 5%

If you want to borrow gold, the leasing fee is $X per ounce, payable at t = 1

The forward price on a 1-year gold forward contract is $1,010

a) What is the lowest possible value of X such that there is no arbitrage opportunity?

b) Suppose X were $1 lower than your answer to part a. Describe how you would construct an arbitrage