Question: What should a trader do when the one-year forward price of an asset is too low? Assume that the asset provides no income. a. Short

What should a trader do when the one-year forward price of an asset is too low? Assume that the asset provides no income.

a. Short the asset, invest the proceeds of the short sale at the risk-free rate, enter into a short forward contract to sell the asset in one year.

b. Borrow the price of the asset, buy one unit of the asset and enter into a short forward contract to sell the asset in one year.

c. Borrow the price of the asset, buy one unit of the asset and enter into a long forward contract to buy the asset in one year.

d. Short the asset, invest the proceeds of the short sale at the risk-free rate, enter into a long forward contract to buy the asset in one year.

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