The spot price of gold (for immediate delivery) is quoted at $1,735 per troy ounce and the risk-free rate is 5% per annum with continuous compounding. Furthermore, to store one troy ounce of gold it costs $16 per year, payable quarterly in advance.

Answer the following questions in the space provided below.

(a) A certain trader quotes the six-month forward price on gold at $1,795. Does an arbitrage opportunity exist? If so, describe in words (no numbers required) how you can make a risk-free profit from this situation. In your answer be sure to include: (i)the name of the arbitrage strategy available in this case, and (ii)the actions you take at various times (i.e., today, in three months, and in six months). Assume that short selling of gold is possible. (3 marks)

(b) What is the dollar amount of the risk-free profit that can be made per troy ounce using the above arbitrage strategy? (1 mark)

IF YOU CAN'T ANSWER A) PLEASE ANSWER B)