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(7 Points) Suppose that you believe the price of XYZ will fall over the next T years. You would like to short sell the shares
(7 Points) Suppose that you believe the price of XYZ will fall over the next T years. You would like to short sell the shares of XYZ, however, you are unable to do so. Suppose the current market price per share on XYZ is S and you can borrow or lend at continuously compounded risk-free interest rate of r. Moreover, the current T-year futures price on XYZ is F. Demonstrate how you can effectively short sell XYZ shares using the futures contract. Assume the stock pays no dividends
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