A 9 month forward contract established as rate of $105. The contract is two months into its life. At month 2, the spot price is $100, the annual risk free rate is 5 percent, and the underlying makes no cash payments. At month 2, which of the following (is) are correct?

I. The amount at risk of credit loss is $1.09

II. Long position bears potential credit risk.

III. Short position have no current credit risk

1. II and III only

2. III only

3. I and II only

4. I and III only