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Basic Question 4 of 7
Assume the risk-free rate is 5%. The current price of gold is $300 per ounce and the forward price of gold is $315 in one year's time. If you want to replicate a long forward position, you would ______.
B. short sell gold now at $300, deposit the money in the bank at 5% and buy it back in one year at $315
C. short sell gold and deposit the money in the bank at 5%
A. borrow money to buy gold at $300 now
B. short sell gold now at $300, deposit the money in the bank at 5% and buy it back in one year at $315
C. short sell gold and deposit the money in the bank at 5%
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Learning Outcome Statements
explain how the concepts of arbitrage and replication are used in pricing derivatives
CFA® 2026 Level I Curriculum, Volume 5, Module 4.