You Lend $1,000 at 10% Per Year for Three Months

question 32

Multiple Choice

You lend $1,000 at 10% per year for three months and proceed to short sell Asset XYZ for $1,000 in the cash market. You are required to pay $75 to the lender of Asset XYZ (which is the proceeds the lender would have received) . You then immediately buy a futures contract at $950 for delivery of asset XYZ in three months (this will cover your short position) . What is the net profit or loss from your strategy of lending money, short selling, and buying the futures contract?

• A) $50
• B) $25
• C) $0
• D) -$25

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