Suppose the futures price is below the price predicted by IRP.What steps would assure an arbitrage profit?
A)Go short in the spot market,go long in the futures contract.
B)Go long in the spot market,go short in the futures contract.
C)Go short in the spot market,go short in the futures contract.
D)Go long in the spot market,go long in the futures contract.

Question

Quizplus · Accepted Answer

The futures price is below the price predicted by IRP, so the spot price is expected to rise. To profit from this, one should go short in the spot market (sell the asset now) and go long in the futures contract (agree to buy the asset at a later date at the futures price). This will lock in a profit when the spot price rises and the futures price converges to the spot price.

Suppose the Futures Price Is Below the Price Predicted by IRP.What