Question: A forward contract with a settlement date at time T is issued based on an underlying asset with a current market price of B. The

A forward contract with a settlement date at time T is

A forward contract with a settlement date at time T is issued based on an underlying asset with a current market price of B. The annualised risk-free force of interest applying over the term of the forward contract is 8 and the underlying asset pays no income. Show that the theoretical forward price is given by K = Beo, assuming no arbitrage. [10 Marks

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