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7. Let A(t) be the value of a risk-free asset at time t and S(t) be the value of a risky asset at time t.
7. Let A(t) be the value of a risk-free asset at time t and S(t) be the value of a risky asset at time t. Additionally let A(0)=100,A(1)=102 and S(0)=10. Determine if F=10.1 is a fair forward price for tlivery at t=1, if not explain how you would exploit the arbitrage opportunity to make a risk-free profit. 8. Let A(t) be the value of a risk-free asset at time t and S(t) be the value of a risky asset at time t. Additionally let A(0)=100,A(1)=102 and S(0)=10. Determine if F=10.3 is a fair forward price for delivery at t=1, if not explain how you would exploit the arbitrage opportunity to make a risk-free profit
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