Question: The risk free rate is 4% annually compounded, the beta of an asset with respect to the market portfolio is 1.25 and the expected return

The risk free rate is 4% annually compounded, the beta of an asset with respect to the market portfolio is 1.25 and the expected return on the market portfolio in 1 year is 10% annually compounded. A futures contract on the asset with 1 year to its delivery date has a futures price of $100. The expected future spot price of the asset in 1 year should be:

a. Greater than $100

b. Equal to $100

c. Less than $100

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