Why C is not correct Suppose you have the following information available to you A forward contract on the Euro written at a rate of 1 60 AUD EUR and a futures contract on the Euro written at a rate of 1 65 AUD EUR Suppose the former expires on the 22nd of November whereas the latter expires on the 22nd September Which of the following is most correct Assume that both contracts are written on the same amount of Euro A) a trader can make a riskless profit by taking a short position in the forward contract and a long position in the futures contract This profit is equal to 0 05 AUD EUR per contract B) The trader can make a riskless profit but it may not necessarily equal 0 05 AUD EUR per contract due to transaction costs C) Whilst the trader may be able to profit, it is not a riskless profit because the forward contract obligates him to deliver Euro on 22nd September and he will not receive Euro until 22nd November D) None of the above is correct

Question

Why C is not correct  Suppose you have the following information available to you  A forward contract on the Euro written at a rate of 1 60 AUD EUR and a futures contract on the Euro written at a rate of 1 65 AUD EUR  Suppose the former expires on the 22nd of November whereas the latter expires on the 22nd September  Which of the following is most correct  Assume that both contracts are written on the same amount of Euro  A) a trader can make a riskless profit by taking a short position in the forward contract and a long position in the futures contract  This profit is equal to 0 05 AUD EUR per contract B) The trader can make a riskless profit but it may not necessarily equal 0 05 AUD EUR per contract due to transaction costs C) Whilst the trader may be able to profit, it is not a riskless profit because the forward contract obligates him to deliver Euro on 22nd September and he will not receive Euro until 22nd November D) None of the above is correct

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Why C is not correct? Suppose you have the following information available to you. A forward contract on the Euro written at a rate of

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