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Suppose a security has a current price of $20.00, and Investor A believes the future price of the security will either be $22.20 after one
Suppose a security has a current price of $20.00, and Investor A believes the future price of the security will either be $22.20 after one year or $18.00 after one year. Investor B believes the future price will be $23.00 after one year or $17.00 after one year. Given a 6% annual risk-free rate, the forward price of the security is $21.20. Does the forward contract cost one investor more money than the other investor? Defend your answer by comparing the cost of the tracking portfolio for each investor
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