Part 4.

The current price of wheat is $572 per 5,000 bushels. The storage cost of wheat is 3%. The risk-free interest rate is 5 percent.

Part a. What should the price of a wheat futures contract that expires in 90 days be for no arbitrage? (Note that wheat futures are for 5,000 bushels).

Part b. Illustrate how an arbitrage transaction could be executed if the 90-day futures contract is priced $585.

Part c. Illustrate how an arbitrage transaction could be executed if the 90-day futures contract is priced $567.