1. Consider a 3-year forward contract for an investment asset that provides no income. The spot price for the investment asset is $40, and the prevailing risk-free rate is 6%. What is the forward price?

2. Suppose that for a Treasury bond futures contract, the cheapest-to-deliver bond is a 4% coupon bond with a quoted price of 114.50 and conversion factor of 1.3150. The futures contract matures in six months and the next coupon will be paid in six months. There is no accrued interest. The six-month risk-free interest rate is 5%.What is the value of the Treasury bond futures contract?

3. Suppose that a six-month European call and put option with a strike price of 60 is $11 and $8, respectively. The current stock price is $61.81 and the risk-free rate is 4%.

Does put call parity hold?

Answer rating: 100% (QA)

1For the 3year forward contract The formula to calculate the forward price is FSert Where 40S40 6r6 ... View the full answer