Question: Question 3: (Maximum 2 pages) You are making markets in derivatives for a specific asset which is trading for $200 in the spot market at

Question 3:

(Maximum 2 pages) You are making markets in derivatives for a specific asset which is trading for $200 in the spot market at this time. Today is January 2, 2023 and the Canadian term structure of money-market interest rates is provided below. These rates are expressed in decimals

Term Ending date Rate

0x6 2023-07-11 0.005

0x12 2024-01-13 0.010

0x18 2024-06-13 0.014

0x24 2025-01-12 0.019

1. (a) If the asset pays $10 in income on January 2, 2025, what is the fair delivery price for this contract? Spell out each step associated with the contracts manufacturing process, in the proper sequence.

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