The Spot Price Trades at a Bid/ask Quote of 100-101

question 6

Multiple Choice

The spot price trades at a bid/ask quote of 100-101 (you can buy at 101 and sell at 100) . The one-year forward trades at 99-101.90 (you can buy forward at 101.90 and sell forward at 99) . If the simple interest rate for one year is 2%, which of the following statements is most accurate?

• A) You can execute an arbitrage by buying spot and selling forward.
• B) You can execute an arbitrage by selling spot and buying forward.
• C) You can execute an arbitrage by selling spot, buying forward, and investing the proceeds of the spot sale at 2%.
• D) You cannot execute an arbitrage at these prices.

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Definitions:

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The sequential order of the birth of children in a family, which is sometimes believed to influence their personality and behavior.

Jealous

Feeling or showing an envious resentment of someone or their achievements, possessions, or perceived advantages.

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A psychological construct representing standard strategies that parents use in raising their children, including authoritative, authoritarian, permissive, and uninvolved styles.

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Pertaining to the eastern part of Europe, including countries such as Poland, Ukraine, Russia, and Romania among others.