Consider a forward contract on IBM requiring purchase of a share of IBM stock for $150 in six months. The stock currently sells for $140 a share. Assume that it pays no dividends over the coming six months. Six-month zero-coupon bonds areselling for $98 per $100 of face value.

If the forward is selling for $10.75, is there anarbitrage opportunity? If so, describe exactly how you could take advantage of it.

Answer rating: 100% (QA)

Yes there is an arbitrage opportunity for the buyer And I could take a... View the full answer