(PLEASE SHOW ALL CALCULATION, NO EXCEL

FUNCTIONS)

Suppose that the current spot price of gold is $1,756, the February 2023 gold futures price (the six-month contract) is $1,798.75 and the May 2023 gold futures price (the nine-month contract) is $1,806.35. The annual risk-free rate is 4.2%. a. Show that the February gold futures price does not satisfy spot-futures parity. b. Neither of the futures prices given satisfies parity. Using the futures contract (February or May) that you believe offers a reverse cash and carry arbitrage opportunity, demonstrate the reverse cash and carry arbitrage strategy and report the profit per ounce. c. For a spot-futures cash and carry arbitrage strategy, what three transactions would the arbitrageur make today (time 0)? (That is, what three things would the arbitrageur do today to set up the arbitrage trade?) d. Assuming you took a position in 300 gold futures contracts in the futures contract above (February or May) that offers a cash and carry arbitrage strategy, what would be your total profit? Suppose that the current spot price of gold is $1,756, the February 2023 gold futures price (the six-month contract) is $1,798.75 and the May 2023 gold futures price (the nine-month contract) is $1,806.35. The annual risk-free rate is 4.2%. a. Show that the February gold futures price does not satisfy spot-futures parity. b. Neither of the futures prices given satisfies parity. Using the futures contract (February or May) that you believe offers a reverse cash and carry arbitrage opportunity, demonstrate the reverse cash and carry arbitrage strategy and report the profit per ounce. c. For a spot-futures cash and carry arbitrage strategy, what three transactions would the arbitrageur make today (time 0)? (That is, what three things would the arbitrageur do today to set up the arbitrage trade?) d. Assuming you took a position in 300 gold futures contracts in the futures contract above (February or May) that offers a cash and carry arbitrage strategy, what would be your total profit