Explain the Impact Transaction Costs Have on the Ability to Make

question 1

Essay

Explain the impact transaction costs have on the ability to make arbitrage profits in forward and futures markets.

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Definitions:

Semiannual Interest Payments

Interest payments made twice a year on investments such as bonds.

Annual Contract Rate

The interest rate agreed upon in a contract for a year-long period.

Carrying Value

Also known as book value, it is the value of an asset or liability according to a company's financial statements.

Par Value

The nominal or face value of a bond, share of stock, or other security, as stated by the issuer.