Question: Please show me step by step work to enable me follow along and prepare for my exam A 1-year forward contract on an investment asset
Please show me step by step work to enable me follow along and prepare for my exam
- A 1-year forward contract on an investment asset provides known future income that has a present value of $20 and the spot price for the underlying investment asset is $115. Assuming that the annual risk-free rate is 7%, what is the forward price?
- Consider a 6-month forward contract on an investment asset that is expected to provide income equal to 3% of the asset price on an annualized basis. The risk-free rate (with continuous compounding) is 5% per annum. The spot price of the underlying asset is $70. What is the forward price?
- A long forward contract on an asset that provides no income was entered into some time ago. It currently has one year remaining to maturity. The risk-free interest rate (with continuous compounding) is 6% per annum. The asset price (i.e., spot price) is $115 and the delivery price is $100. For the long position, what is the value of this forward contract?
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