Homework Answers
Correct answer: 6.68%
Continuosly compounding rate can be computed with Log natural of end price upon start price.
Spot price = 1,650
Forward price = 1,700
Arbitrage profit = 6
Total End price = 1,700+5 = 1,700
Forward maturity = 6 months
Continuosly compounded rate for semi-annual:
Continuosly compounded rate per annuam:
Hope it will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.
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