We know how to derive forward prices for stocks in a frictionless market. In this problem, you are asked to explain how the presence of frictions such as bid-ask spreads or different interest rates for borrowing and lending imply no-arbitrage bounds on prices rather than a single no-arbitrage price. Specifically, suppose that a trader faces bid-ask spreads posted by a dealer such that the stock and forward contract have bid and ask prices of Sbrl. Derive a no-arbitrage upper bound F+ for the forward bid price Fb with time-to-maturity T using no-arbitrage arguments. Assume that the stock pays no dividends, that there are no trading fees incurred at time T, and that the forward contract is settled by delivery of the stock. Which of the following is correct? F+=(Sa)erlT F+=(Sa)erbT F+=(Sb)erlT F+=(Sb)erbT