a. Suppose the March Year 1 forward price were $3.10. Describe two different transactions you could use
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a. Suppose the March Year 1 forward price were $3.10. Describe two different transactions you could use to undertake arbitrage.
b. Suppose the September Year 1 forward price fell to $2.70 and subsequent forward prices fell in such a way that there is no arbitrage from September Year 1 and going forward. Is there an arbitrage you could undertake using forward contracts from June Year 1 and earlier? Why or why not?
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a The first possibility is a simple cash and carry arbitrage Transaction Time0 TimeT 312 ShortMarchf...View the full answer
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