You are an arbitrageur at Hope Fund arbitrage desk, and you would like to see whether there are any trading opportunities from the mispricing of the crude oil market.

You have obtained the following information:

Spot WTI Crude Oil price (USD) : $60.50 per barrel

1-month WTI Crude Oil futures (USD) : $63.00 per barrel

Contract size : 500 barrels

Spot exchange rate (USD/MYR) : 4.0000

Interest rate : 5% per annum

Storage cost : 2% per annum

Initial margin : 25% per trade amount

Maintenance margin : 65% of the initial margin

Assume that the futures will expire at the end of the contract month, and the number of days per calendar year is 360.

Note: Round your answers (number of contracts, and payoff figures) to the nearest number.

1. Based on the information above, determine whether arbitrage opportunity is available with an appropriate strategy. (5 marks)
2. Assume that the price of crude oil increases by 20%, compute the payoff (in terms of USD) based on the opportunity in part (a) above. (5 marks)
3. Based on your futures position in part (a) above, fill in the table below and justify the price level that you will receive a margin call. (9 marks)

Day	Crude oil price ($)	Adjustment ($)	Balance ($)
1	63
2	65
3	75
4	40
5	30

4. Exchange rate risk is one of the considerations of investing in foreign derivatives.

Discuss the statement above with an appropriate illustration based on the above given information. (6 marks)