Suppose that you enter into a 6-month forward contract at a price of $100 on a non-dividend paying stock currently trading at $99. Assuming that the above forward price is the no-arbitrage price of the contract, which of the below is closest to the level of the annual interest rate (using discrete compounding)? Question 3Answer a. 4.1 % b. 1.0 % c. 3.1 % d. 2.0 %
Suppose that you enter into a 6-month forward contract at a price of $100 on a non-dividend paying stock currently trading at $99. Assuming that the above forward price is the no-arbitrage price of the contract, which of the below is closest to the level of the annual interest rate (using discrete compounding)? Question 3Answer a. 4.1 % b. 1.0 % c. 3.1 % d. 2.0 %
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Suppose that you enter into a 6-month forward contract at a price of $100 on a non-dividend paying stock currently trading at $99. Assuming that the above forward price is the no-arbitrage price of the contract, which of the below is closest to the level of the annual interest rate (using discrete compounding)?
Question 3Answer
a.
4.1 %
b.
1.0 %
c.
3.1 %
d.
2.0 %
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