Question: Assume that the interest rate r = 4% (continuously compounded) is con- stant. If today's stock price is 9.14, what will be tomorrow's stock

Assume that the interest rate r = 4% (continuously compounded) is con-

Assume that the interest rate r = 4% (continuously compounded) is con- stant. If today's stock price is 9.14, what will be tomorrow's stock price such that the marking-to-market for a long position in futures with deliv- ery in 3 months is 0.54? State any formulae used. (15 marks)

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Step 1 Use the formula for the present value of a future sum PV FV1rn where FV is the future value r is the interest rate and n is the number of time ... View full answer

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