Question: Consider a 1-year forward contract on a stock when the stock price is GH 50 and the risk free rate is 8% per annum with

Consider a 1-year forward contract on a stock when the stock price is GH 50 and the risk free rate is 8% per annum with continuous compounding. Suppose that the forward price is GH 53 and short selling requires a 30% security deposit attracting interest at d = 4% per annum with continuous compounding. i. Does it exists an arbitrage opportunity? ii. What is the highest rate d for which there is no arbitrage opportunity?

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