Is there an arbitrage opportunity How can the trader make a profit Assume discrete compounding The spot of the underlying asset is $250 The annual interest rate is 8 Maturity is in 12 months The forward price is $275 A The trader will sell short the underlying asset at $250, lend out the funds at 8 for one year and enter the forward contract in which the trader will receive the underlying asset and deliver the forward price B The trader will borrow $250 at 8 for one year, buy the underlying asset and enter the forward in which the trader will receive the underlying asset and deliver the forward price C The trader will borrow $250 at 8 for one year, buy the underlying asset and enter the forward in which the trader will receive the forward and deliver the underlying asset D The trader will sell short the underlying asset at $250, lend out the funds at 8 for one year and enter the forward contract in which the trader will receive the forward and deliver the underlying asset

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Is there an arbitrage opportunity? How can the trader make a profit? Assume discrete compounding. The spot of the underlying asset is $250. The annual

Is there an arbitrage opportunity? How can the trader make a profit? Assume discrete compounding. The spot of the underlying asset is $250. The annual interest rate is 8%. Maturity is in 12 months. The forward price is $275.

A. The trader will sell short the underlying asset at $250, lend out the funds at 8% for one year and enter the forward contract in which the trader will receive the underlying asset and deliver the forward price.
B. The trader will borrow $250 at 8% for one year, buy the underlying asset and enter the forward in which the trader will receive the underlying asset and deliver the forward price.
C. The trader will borrow $250 at 8% for one year, buy the underlying asset and enter the forward in which the trader will receive the forward and deliver the underlying asset.
D. The trader will sell short the underlying asset at $250, lend out the funds at 8% for one year and enter the forward contract in which the trader will receive the forward and deliver the underlying asset.