Suppose the continuously compounding interest rate r is constant. Given S(0), find the price of the stock after two days such that the marking to market of futures with delivery in 3 months is a dollars on day one and b dollars on day two.

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Q: Suppose the continuously compounding interest rate r is constant. Given S(0), find the price of the…

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Q: Suppose the 6-month Mini S&P 500 futures price is 1,170.78, while the cash price is 1,158.57. What…

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Interest Rate

When you deposit your money with the bank, the deposit earns you some extra money at the end of the specific period – something more than what you deposited. That amount of money that the bank pays you for keeping the money with the bank is the “interest” and the percentage at which the bank pays you for your amount is called the “interest rate”.