Silver can currently be bought or sold at a market price of $24 per ounce. The nine-month maturity silver futures price is $28 per ounce, and the risk-free interest rate is 2% (effective annual). Assume borrowing or lending is done at the risk-free rate and that short-selling silver comes with no restrictions. Select the statement which correctly lists an arbitrageurs transactions to make arbitrage profit and states the correct amount of arbitrage profit earned at maturity.

a.

Take a long futures position, short sell an ounce of silver, lend $24. Profit of $4

b.

Take a short futures position, borrow $24, buy an ounce of silver. Profit of $3.64

c.

Take a long futures position, short sell an ounce of silver, lend $24. Profit of $3.64

d.

Take a short futures position, borrow $24, buy an ounce of silver. Profit of $4