Prove equation #3 by the technique of Arbitrage.

Your proof should be clear to the point. It should not contain any unnecessary steps. In math terms it should be eloquent.

Simply show that your Arbitrage has no investment and has a positive profit for sure.

tFt - Future price

St - spot price

tRtL - lending price

tDt - dividend

II. Commodities with Possibly Negative Cost of Carry (eg. Stocks, Bonds, Foreign Exchange) 2) F, SS, (1+,r," ) - D, Proof by Cash & Carry Arbitrage 3) F, S. (1+ r1") - D Proof by Cash & Carry Arbitrage 4) S. (1+ r1')-DS.F, SS. (1+ r ) - D from 2) & 3) 5) F, = S. (1+ IT) - D = S, +S(-d) for r = r = 11 II. Commodities with Possibly Negative Cost of Carry (eg. Stocks, Bonds, Foreign Exchange) 2) F, SS, (1+,r," ) - D, Proof by Cash & Carry Arbitrage 3) F, S. (1+ r1") - D Proof by Cash & Carry Arbitrage 4) S. (1+ r1')-DS.F, SS. (1+ r ) - D from 2) & 3) 5) F, = S. (1+ IT) - D = S, +S(-d) for r = r = 11