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Consider an investor with the following portfolio: (1) long position in stock F, (2) a loan from the bank (at the risk-free rate) that fully
Consider an investor with the following portfolio: (1) long position in stock F, (2) a loan from the bank (at the risk-free rate) that fully funds the purchase of stock F, (3) a long position in a futures contract with stock F as underlying that expires on the same date when loan repayment is due. If the futures contract is priced fairly, the expected cash flow at futures maturity is $0.
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