The current spot price of a stock is $100 per share, and the risk-free rate is 5%.

The stock pays no dividends and costs nothing to store.

Use formula 2.2 from the reading to calculate the theoretical arbitrage-free or fair price of a one-year forward contract.

An investor buys the forward contract at the price from question 1; s/he is long the futures contract.

In a year, the spot stock price is $90 per share.

What is the payoff from financially settling the long future position? $__________

In a year, the spot stock price is $95 per share.

What is the payoff from financially settling the long future position? $__________

In a year, the spot stock price is $100 per share.

What is the payoff from financially settling the long future position? $__________

In a year, the spot stock price is $105 per share.

What is the payoff from financially settling the long future position? $__________

In a year, the spot stock price is $110 per share.

What is the payoff from financially settling the long future position? $__________

Solving for the futures contract price established at Time 0 gives the arbitrage-free, or "fair," futures price as F0=S0(1+r)tCFt