Today Is January 1

question 14

Multiple Choice

Today is January 1.The forward price for contracts maturing on April 1 is $103 and on October 1 is $108.On April 1,the price of a zero-coupon bond maturing on October 1 is $0.97.Assuming that the underlying interest rate is a continuously compounded interest rate,the amount of profit that you can make on October 1 by trading one contract each of the near and distant maturity forwards and other securities is:

• A) $0.50
• B) $0.81
• C) $1.81
• D) $2.98
• E) None of these answers are correct.