3. The one year futures of DMX Co. are selling at $11. The current stock price is $10 and the
risk-free rate is 8%. There are no further costs or benefits of holding the future contracts.
John Harper is considering shorting futures. Which of the following statements is most likely
true?
A. There exists an arbitrage opportunity as the transaction will yield a return higher than the
risk-free rate without assuming any risk.
B. There is no arbitrage opportunity because the transaction does not yield a return higher
than the risk-free rate.
C. There is no arbitrage opportunity because the transaction is not risk-free.
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