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The spot price of the market index is $900. A 3-month forward contract on this index is priced at $930. The annual rate of interest

The spot price of the market index is $900. A 3-month forward contract on this index is priced at $930. The annual rate of interest on treasuries is 2.4% (0.2% per month). What annualized rate of interest makes the net payoff zero? (Assume monthly compounding.)

A) 4.8%

B) 8.5%

C) 11.2%

D) 13.2%

Answer: D

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