Answer: JPY 5,132

**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 \( F(1 + R)^t = (S + U) \cdot (1 + L)^t \)

Author: LeetQuiz .