Suppose the S&R index is 1000 and the dividend yield is zero. The continuously compounded borrowing rate is 5% while the continuously compounded lending rate is 4.5%. The maturity of the forward contract is 6 months.

(a) Suppose now that there is a bid-ask spread on the index. The ask price of the index is 1005 while the bid price of the index is 995. What is the upper bound of the forward price?

(b) What is the lower bound of the forward price?