Question: 1. (10 points) Consider a forward contract on an asset paying no income with price (S;)120 (e.g., stock without dividends) with maturity T. Let

1. (10 points) Consider a forward contract on an asset paying no income with price (S1)120 (e.g., stock without dividends) wi

1. (10 points) Consider a forward contract on an asset paying no income with price (S;)120 (e.g., stock without dividends) with maturity T. Let Z(t, T) be the value at time t of a ZCB maturing at time T. Let F(t, T) denote the forward price. It holds that F(t, T) = S,Z(t, T)-1. (1) (1) Show (1) using replication argument. (ii) Show (1) using no-arbitrage argument.

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