23 Jul WHAT IS THE THREE-YEAR FORWARD PRICE?
The spot price of an investment asset is $30 and the risk-free rate for all maturities is Show more Question-3 The spot price of an investment asset is $30 and the risk-free rate for all maturities is 10% with continuous compounding. The asset provides an income of $2 at the end of the first year and at the end of the second year. What is the three-year forward price? (2 mark) Question-4 On March 1 a commoditys spot price is $60 and its August futures price is $59. On July 1 the spot price is $64 and the August futures price is $63.50. A company entered into futures contracts on March 1 to hedge its purchase of the commodity on July 1. It closed out its position on July 1. What is the effective price (after taking account of hedging) paid by the company? (2 marks) can you please show calculation in detail and explain it thanks. Show less
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