2. Your company is considering insuring against decreases in the price of a product that...
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2. Your company is considering insuring against decreases in the price of a product that it will sell a year from now. The current price of the product is $50 and the risk-free annual effective rate of interest is 4%. The company has a choice of entering into a one-year short forward contract with a forward price of $52 or buying a one-year 50-strike European put with a premium of $4.94. For what range of spot prices at expiration would the profit from the forward exceed the profit from the put? (A) $46.86 to 0 (B) 0 to $46.86 (C) 0 to $50 (D) 0 to $52 (E) 0 to $57.14
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