Explanation : For a stock that neither receives benefits nor incurs carrying costs during
the term of the contract, the forward price is found by compounding the
spot price at the risk-free rate over the life of the contract.
Explanation : The forward price of each stock is found by compounding the spot price by
the risk-free rate for the period and then subtracting the future value of
any benefits and adding the future value of any costs. In the absence of
any benefits or costs, the one-year forward prices of PSO and NRL should
be equal. After subtracting the benefits related to PSO, the one-year
forward price of PSO is lower than the one-year forward price of NRL.