Suppose the spot price of corn is $4.25 per bushel. The annual storage costs are $1 per bushel in total, paid semiannually in advance (at t=0 and at t=6 month). The interest rate is 4% per year with continuous compounding. Note that corn is a commodity that is a consumption asset. Suppose the actual quoted price for a one-year forward contract is $4.75 per bushel. What would an arbitrageur do? Assume that the borrowing or lending rate equals to the risk-free rate. Buy the forward contract Sell the forward contract Do nothing since there is no feasible arbitrage opportunity