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Suppose That You Trade a Forward Contract Today That Matures

Question 15

Multiple Choice

Suppose that you trade a forward contract today that matures after one year.The forward price is $105 and the simple interest rate is 7 percent per year.If after six months from today,the spot price is going to be $125 and the value of the forward contract is $20,the arbitrage profit that you can make today by trading one forward contract and other securities is:


A) 0
B) $1.56
C) $2.96
D) $3.55
E) None of these answers are correct.

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