Assume risk free rate of 5pr cent (with 360 days) per year calculate the spot price,...

Question

Question

Assume risk free rate of 5pr cent (with 360 days) per year calculate the spot price, So upon initiation of the contract.

Future price = 14,10

5 days remaining until the delivery

ANSWER:

F_0,5 =14,10 = S_o * e^{(-0,05)
(5/360)} $\Leftrightarrow$ S₀= 14,09

How do you get 14,09 ?

Is e^{(-0,05) (5/360)} = 0,9993058

business finance

Answer 1

Answer #1

Hi

In this formula a slight error is there,

F = S0*e^(rt)

S = F*e^(-rt)

S = 14.10*e^(-0.05*5/360)

S = 14.10* 0.9993

S = 14.09

Thanks

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Answer 2

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