a) If the actual price of a forward contract on a share of stock is lower than the theoretical forward price, the correct arbitrage strategy is to sell the forward contract, buy the stock and borrow the stock purchase price.

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True/False

b) If the actual price of a forward contract on copper (a consumption commodity) is lower than the theoretical forward price, an arbitrager can make a riskless arbitrage profit by buying the forward contract, short-selling copper and lending the proceeds of the short-sale at the risk free rate.

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True/False

c) Considering margin requirements and the daily settlements of profits and losses on a futures contract, a U. S. based hedger who plans to hedge a future cash inflow of British pounds would prefer to hedge by selling British pound futures contracts rather than selling British pound forward contracts, if the correlation between changes in the spot price of British pounds and changes in the U. S. interest rate is 0.85.

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True/False