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A stock currently sells for $80, and it will pay no dividends in the future. Consider a 2-year forward contract on this stock. The forward
A stock currently sells for $80, and it will pay no dividends in the future.
Consider a 2-year forward contract on this stock.
The forward price is $90. The risk-free rate is 3% per annum.
Is there an arbitrage?
If so, show the arbitrage strategy using a table listing asset positions and cash flows.
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