Exercise 1.6 Suppose that A(0) = 100 and A(1) = 105 dollars, the present price of pound sterling is S(0) = 1.6 dollars, and the forward price is F = 1.50 dollars to a pound with delivery date 1. How much should a sterling bond cost today if it promises to pay 100 at time 1? Hint: The for- ward contract is based on an asset involving negative carrying costs (the interest earned by investing in sterling bonds). Exercise 1.10 In the above setting, find the final wealth of an investor whose initial capital of $1,000 is split fifty-fifty between stock and options. Exercise 1.6 Suppose that A(0) = 100 and A(1) = 105 dollars, the present price of pound sterling is S(0) = 1.6 dollars, and the forward price is F = 1.50 dollars to a pound with delivery date 1. How much should a sterling bond cost today if it promises to pay 100 at time 1? Hint: The for- ward contract is based on an asset involving negative carrying costs (the interest earned by investing in sterling bonds). Exercise 1.10 In the above setting, find the final wealth of an investor whose initial capital of $1,000 is split fifty-fifty between stock and options