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?

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?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter22: International Financial Management

Section: Chapter Questions

Problem 2P

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