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The spot price of an investment asset that provides no income is $30 and the risk-free rate for all maturities (with continuous compounding) is 10%. What is the three-year forward price

Sagot :

abiolataiwo2015

The three-year forward price is $40.50.

What forward price?

Forward price can be defined as the agreed price which a seller gives to the buyer in a forward contract at a specific period of time.

Using this formula

Forward price=S0ert

Where:

r=Risk-free rate=10%

S0=Spot price=$30

T=Time=3 years

Let plug in the formula

Forward price=30×e^(10%×3)

Forward price=30×e^0.3

Forward price =$40.495

Forward price=$40.50 (Approximately)

Inconclusion the three-year forward price is $40.50.

Learn more about forward price here:https://brainly.com/question/24703884

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