B is correct. The relationship between the variables is:

$F = (S + U) \left[ \frac{1 + R}{1 + L} \right]^t$

where:

• $S$ is the spot price = JPY 5,201
• $U$ is the present value of the storage cost = JPY 65
• $R$ is the risk-free rate of interest = -0.35% = -0.0035
• $L$ is the lease rate = 2.25% = 0.0225
• $t$ = 1 year

First, calculate the ratio: $\frac{1 + R}{1 + L} = \frac{1 - 0.0035}{1 + 0.0225} = \frac{0.9965}{1.0225} = 0.9746$

Then calculate the forward price: $F = (5,201 + 65) \times 0.9746 = 5,266 \times 0.9746 = 5,132$

Why other options are incorrect:

• A uses the equation $F \cdot (1 + L)^t = (S - U) \cdot (1 + R)^t$
• C uses the equation $F = (S + U) \cdot (1 + R + L)^t$
• D uses the equation $F(1 + R)^t = (S + U) \cdot (1 + L)^t$