You are given the following information:
Spot price of market index today = $1,500.
Forward price of nine–month forward contract on market index = $1,540.
Spot price of market index nine months from today = $1,560.
A $1,000 face value nine–month zero–coupon bond is selling for $963.39.
Find the difference, nine months from today, between the profits associated with a long index strategy versus a long forward strategy.
Are these prices consistent? Could they prevail in a well–functioning market?