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What is the net payoffs of the trader overall

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Consider a 7-month forward contract on Apple Computer Inc. (AAPL)
The current price of one share is $208, and the annual continuously compounded risk-free interest rate is 5%.
Suppose 1) that the actual quoted forward price for a 7-month contract is 215.15 per share of AAPL; 2) that the borrowing rate is 7% per year with semiannual compounding and lending rate is 4.8% per year with monthly compounding; and 3) the arbitrageur insists shorting a forward contract on 1 share of stock and using proper "arbitrage" asset trading and loan transactions as we discussed in lecture.

What is the net payoffs of the trader's overall arbitrage trading strategy at t=7 month?

Reference no: EM132774793

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