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Consider a 2-year forward contract on a non-dividend-paying stock. The current stock price is $500. The...

Consider a 2-year forward contract on a non-dividend-paying stock. The current stock
price is $500. The forward price is $520, and the risk-free interest rate is 5% per annum.
Is there an arbitrage? If so, what is the arbitrage profit today? (Consider an arbitrage
strategy where we long or short the forward on one share of the stock and the net cash
flow in year 2 is zero)

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jeff jeffy answered 2 years ago
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