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63
The spot price of an investment asset that provides no income is $30 and the risk-free rate for all maturities (with continuous compounding) is 10%. What is the three-year forward price?
A. $40.50
B. $22.22
C. $33.00
D.$33.16
A. $40.50
B. $22.22
C. $33.00
D.$33.16
Answer: A
The 3-year forward price is the spot price grossed up for 3 years at the risk-free rate. It is 30e0.1×3 =$40.50.
The 3-year forward price is the spot price grossed up for 3 years at the risk-free rate. It is 30e0.1×3 =$40.50.
plonkarchivist (21.12.2023)
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Flashcard info:
Author: CoboCards-User
Main topic: Finance & Investment
Topic: Derivatives
Published: 27.10.2015