1. If the dividend yield is greater than the risk-free rate, r q < 0, then we know that _______.

1. the futures price will be higher as contract maturity increases
2. the futures price will be unchanged as contract maturity increases
3. the futures price will be lower as contract maturity increases
4. arbitrage profits are possible

2. Suppose that the one-year forward price of an asset is $110 while the equilibrium price is $100, and the asset bears no income and no storage cost. Which statement is true?
   1. The spot price is over-priced and the forward price is under-priced.
   2. The spot price is over-priced and the forward price is over-priced.
   3. The spot price is under-priced and the forward price is over-priced.
   4. The spot price is under-priced and the forward price is under-priced.