31. (formerly Question 58 from the Interest Theory section)

You are given the following information:

(i) The current price of stock A is 50.

(ii) Stock A will not pay any dividends in the next year.

(iii) The annual effective risk-free interest rate is 6%.

(iv) Each transaction costs 1.

(v) There are no transaction costs when the forward is settled.

Based on no arbitrage, calculate the maximum price of a one-year forward.

(A) 49.06

(B) 50.00

(C) 50.88

(D) 53.00

(E) 55.12

官方的答案是:

31. Solution: E
The transaction costs are 2 (1 for the forward and 1 for the stock)
The price of the forward is therefore (50 + 2)(1.06) = 55.12.

我不是很理解这个答案！

为什么transaction cost要算2次呢