Assume tFT2 = tFT1 (1 + T1rT2) + T1CT2 is the equilibrium situation.

Also assume that T2 T1 is one year, that T1CT2 = $1 and that T1rT2 = 10%.

Assume the initial prices are tFoT1 = 100 & tFoT2 = 133.

This is not an equilibrium situation.

Say the next day, t + 1, the t+1FT1 price adjusts to 115.

What would be the equilibrium price for t+1FT2?

A) 112

B) 127.5

C) 122

D) None of these represent an equilibrium price for t+1FT2