Explanation:
F = spot × [(1 + r) / (1 + q)]^T
F = $2,500 × [(1.037) / (1.015)]^0.75
F = $2,540.53
(Book 3, Module 36.1, LO 36.f)
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Use the following information to answer the next two questions.
A derivatives trader wishes to calculate the price of a nine-month forward contract for which the underlying asset is a stock index with a value of $2,500 and has a continuous dividend yield of 1.5%.
Question 51 of 100
What is the price of the forward contract, assuming the risk-free rate is 3.7%?
A
$2,540.53.
B
$2,555.61.
C
$2,594.23.
D
$2,627.98.
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