The spot price of gold is currently $1,782.90 and the risk free rate is at 8%. The gold will provide income over the next year of $30 every 3 months, but it will cost $20 per quarter to store. The storage costs will be incurred at the end of each quarter and the income payments will be received at the end of each 3 month period. Currently, a forward contract with a 9 month maturity is priced at $1,976.80. Assume regular compounding. a. Is the market at, above or below full carry? Is this an example of the basis or the spread? b. Discuss the process of taking advantage of this arbitrage opportunity and the resulting gain or loss. c. If this forward were correctly priced (using the “model” forward price) and there were no storage costs or income payments, what would be the implied repo rate?

Exercise 12-7 shown below are comparative balance sheets for flint corporation. flint corporation comparative balance sheets december 31 assets 2017 2016 cash $ 201,348 $ 65,142 accounts receivable 260,568 225,036 inventory 494,487 559,629 land 236,880 296,100 equipment 769,860 592,200 accumulated depreciation—equipment (195,426 ) (94,752 ) total $1,767,717 $1,643,355 liabilities and stockholders’ equity accounts payable $ 115,479 $ 127,323 bonds payable 444,150 592,200 common stock ($1 par) 639,576 515,214 retained earnings 568,512 408,618 total $1,767,717 $1,643,355 additional information: 1. net income for 2017 was $275,373. 2. depreciation expense was $100,674. 3. cash dividends of $115,479 were declared and paid. 4. bonds payable amounting to $148,050 were redeemed for cash $148,050. 5. common stock was issued for $124,362 cash. 6. no equipment was sold during 2017. 7. land was sold for its book value. prepare a statement of cash flows for 2017 using the indirect method.