Assume_tF_T2=_tF_T1(1 +_T1r_T2) +_T1C_T2is the equilibrium situation.

Also assume that T₂- T₁is one year, that_T1C_T2= $1 and that_T1r_T2= 10%.

Assume the initial prices are_tF^o_T1= 100 &_tF^o_T2= 133.

A trader goes long the F_T1contract and short the F_T2contract believing these are not equilibrium prices and that he will profit when they adjust to equilibrium.

Say the next day, t + 1, the_t+1F_T1price moves to 115 and_t+1F_T2adjusts to an equilibrium price.

If the trader round trips his positions on day t+1, what is his profit or loss on the F_T2position?

cannot be determined from the information given

profit of 11

profit of 5.5

loss of 11