Suppose there’s a stock trading for $100 right now.

The required rate of return is 10%

The risk-free rate is 5%

Should its 1-year forward price be 105 or 110?

Suppose there’s a stock trading for $100 right now.

The required rate of return is 10%

The risk-free rate is 5%

Should its 1-year forward price be 105 or 110?

It should be 105; if it’s 110, cash-and-carry arbitrage time, baby!