Question 4 (Final 2011: 10 points) (a) (3 points) The spot price for gold is $650. The risk-free interest rate is 5%. What is the futures price for gold for a six-month contract? (5 points) The six-month futures price in the market is $682.50. Is there an arbitrage opportunity here? Why? If so how would you exploit it? Explain. (2 points) Consider the formula on the formula sheet: F = P. (1+1, +c) What does 'c' represent? What is 'c likely to be for gold? What about for oil? Why? Hint: I am not looking for a numerical answer here