Spot price of soybeans is $10.1800/bu. The interest rate on fivemonth loans and deposits is quoted at 1.10%. The cost of storage is $0.0204/bu per month paid upfront for the entire storage period. A five month soybeans futures contract is currently traded at $10.4125/bu.

a. First, assume that money can be borrowed and deposited at the quoted rate and there is no transaction cost. Find the noarbitrage price for a soybeans futures contract maturing five months from now and determine whether an arbitrage opportunity is present in the market.

b. Now assume that loans are charged an interest rate 1.00% above the quoted rate, while deposits earn 0.75% below the quoted rate, but there is no transaction cost involved. Determine the noarbitrage bounds for the fivemonth futures price. Does the actual futures price of $10.4125/bu still represent an arbitrage opportunity? If not, explain why.

c. Lastly, assume that, in addition to the difference in borrowing and lending rates given in part b., all sales and purchases of the physical commodity incur a 0.80% handling fee (i.e. an additional charge that both buyers and sellers have to pay). Determine the noarbitrage bounds for the fivemonth futures price under these conditions. Does the actual futures price of $10.4125/bu still represent an arbitrage opportunity? If not, explain why.