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Suppose a trader observes the following prices on June 15 (6/15 = t). The futures price of gold for September 15 (= T 1 )

Suppose a trader observes the following prices on June 15 (6/15 = t).

The futures price of gold for September 15 (= T₁) delivery is $450/oz.Thatis_tF^o_T1= $450.

The futures price of gold for December 15 (= T₂) delivery is $460/oz.Thatis_tF^o_T2= $460.

The borrowing and lending rate is 4% per annum and the storage cost_T1C_T2is $2.00, which is payable on 12/15.

Assume_tF_T2=_tF_T1(1 +_T1r_T2) +_T1C_T2is the equilibrium situation.

What is the arbitrage profit?

a. $2.50

b.$2.00

c. $3.50

d. $1.75

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