Answer-first summary for fast verification
Answer: 1.124% (continuous) and 1.110% (annual)
Use the forward pricing relation with lease rate $\delta$: - **Continuous compounding**: \[ F = S e^{(r-\delta)T} \] so \[ \delta = r - \frac{\ln(F/S)}{T} \] Substituting $S=1822$, $F=1830$, $r=0.02$, $T=0.5$ gives approximately **1.124%**. - **Annual discrete compounding** gives approximately **1.110%**. So the correct choice is **A**.
Author: Manit Arora
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Question 187.4: The spot price of gold is $1,822 and the six-month forward price is $1,830; . The riskless rate is 2.0%. What is the implied per annum lease rate under, respectively, an assumption of i. continuous compounding and ii. annual (discrete) compounding?
A
1.124% (continuous) and 1.110% (annual)
B
1.248% (continuous) and 1.220% (annual)
C
1.362% (continuous) and 1.346% (annual)
D
1.444% (continuous) and 1.428% (annual)
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