A 3-month futures contract on an equity index is currently priced at CAD 1,000. The underlying stocks valued at CAD 990 and pay dividends at a continuously compounded rate of 2%. The continuously compounded risk-free rate is 4%. The potential arbitrage profit per contract is closest to: A) CAD 7.50 B) CAD 1.50 C) CAD 10.00 D) CAD 5.00 Two-year risk-free rate in the US is 3%; the two-year risk-free rate in Canada is 5%. The current CAD/USD exchange rate is 1.05 and the observed two-year forward price is 1.12 CAD/USD, what strategy one should employ to make an arbitrage profit: A) Borrow CAD, buy USD and enter a short forward contract on USD B) By Borrow CAD, buy USD and enter a short forward contract on CAD C) Borrow USD, buy CAD and enter a short forward contract on CAD D) Borrow USD, buy CAD and enter a short forward contract on USD What is the forward price on a six-month forward contract on an asset that is expected to provide income equal to 3.96% per annum (compounded continuously). The continuously rate-free rate is 4% and the asset spot price is $25. A) 28.75 B) 26.81 C) 26.55 D) 25.77. A stock is currently priced at $30 and is expected to pay a dividend of $0.30 for a 20 days from now and a dividend of $0.50 65 days from now. The contract price for a 60-day forward contract when the continuously compounded interest rate is 5% is closest to: A) 29.94 B) 29.45 C) 30.66 D) 31.22 On the Chicago Mercantile Exchange (CME), the futures price for one CAD dollar is CAD $0.75USD for delivery in 12 months. The current exchange rate is $0.75USD for one CAD dollar. The interest rate in the US is 5% for all maturities up to one year. Assuming that are no arbitrage opportunities, what is the interest rate in Canada? A) 2% B) 4% C) 5% D) 6% The spot price of an investment asset that provides no income is $30 and the risk-free rate for all maturities (with continuous compounding) is 10%. What is the three-year forward price? A) $50.40 B) $33.00 C) $40.50 D) $33.16