No arbitrage condition

"A non-dividend paying stock X is currently traded at $100 per share. If the 1-year risk-free interest rate is 5%, what is the no-arbitrage price for a 1-year forward contract written on stock X?"

Could someone explain to me how can I solve this? thank you!

Original post by evita14

"A non-dividend paying stock X is currently traded at $100 per share. If the 1-year risk-free interest rate is 5%, what is the no-arbitrage price for a 1-year forward contract written on stock X?"

Could someone explain to me how can I solve this? thank you!

Spot forward theorem. Remember on a future, no money changes hands until maturity/ exercise.
Therefore, think about what the payoff is at maturity and how can you make it 0. (will need to use discounting)

OP

Would it be $95?

Original post by evita14

Would it be $95?

95.12 I think, 100 x exp(-0.05x1)

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