Suppose that gold prices are $1787 per ounce and the risk-free interest rate is .27% compounded continuously.

a) Find the one-year forward price of gold per ounce.

b) Suppose that a dealer is offering a 1-year forward for $1787 per ounce (instead of the value computed in part a))

Show how a gold owner can make a risk-free profit one year from now. What is the profit per ounce?

C) Suppose a dealer is offering a 1-year forward for $1800 per ounce (instead of the value computed in part a)). Show

how the dealer can make a risk-free profit if anyone enters into this contract. What is the profit per ounce one year

from now?

d) Suppose you enter into an agreement now to buy gold one year from now at the price from part a). Three months

later the price of gold is $1750 per ounce. What is the value of the forward contract at this time (i.e. 3 months after

you enter the agreement). Assume the risk-free interest rate has not changed.