CFA Level I sample question

CFA Level I Arbitrage, Replication, and the Cost of Carry in Pricing Derivatives question

Derivatives / Arbitrage, Replication, and the Cost of Carry in Pricing Derivatives

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Arbitrage, Replication, and the Cost of Carry in Pricing Derivatives sample question

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Derivatives

Arbitrage, Replication, and the Cost of Carry in Pricing Derivatives

A non-dividend-paying asset trades at a spot price of USD 60.00, and the annual risk-free rate is 6.0% with annual compounding. A dealer quotes a one-year forward price of USD 65.00 on the asset. An arbitrageur borrows the full purchase price at the risk-free rate, buys the asset at spot, and sells the forward at the quoted price, holding the position to expiration. The arbitrage profit at expiration, per unit of the asset, is closest to:

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