The current stock price of IBM is S0 = 100 per share. The futures price of IBM futures that mature 2 days from today is F0,2 = 100.05. Suppose IBM does not pay any dividend. The risk-free rate is constant. 

What is the annual continuously-compounded risk-free rate implied by the futures price F0,2? 

Suppose the futures prices at t = 1 and t = 2 are F1,2 = 99 and F2,2 = 102, respectively. What are the implied stock prices S1 and S2 at t = 1 and t = 2? 

Calculate the profits and losses on day 1 and day 2 for buying (long position) one futures contract. 

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The relationship between the spot price futures price riskfree rate and time to maturity is given by ... View the full answer