BEX32-6-AL0/4 QUESTION TWO a) b) c) The spot price of an investment asset that provides no income is $30 and the risk-free rate for all
BEX32-6-AL0/4 QUESTION TWO a) b) c) The spot price of an investment asset that provides no income is $30 and the risk-free rate for all maturities {with continuous compounding) is 10%. What is the three-year forward price? (5 marks) Repeat the question (a) above assuming now that the asset provides an income of $2 at the end of the first year and at the end of the second year. (10 marks) Discuss the similarities and differences between futures and forwards. (10 marks) (TOTAL: 25 MARKS) END OF SECTION A
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