•Suppose that gold currently sells for $1,200 an ounce. If the risk-free interest rate is .1%...
•Suppose that gold currently sells for $1,200 an ounce. If the risk-free interest rate is .1% per month, a six-month maturity futures contract should have a futures price of
•
•
•If the contract has a 12-month maturity, what is the price of the futures?
Homework Answers
Compute the price of the futures using the equation as shown below:
Future price = Spot price * ( 1 + Interest rate ) Period
= $1,200 * ( 1 + .1% ) 6
=$1,207.218024
Hence, the price of the futures is $1,207.21804.
Compute the price of the futures if there is a 12-month matuirity using the equation as shown below:
Price of the futures = Spot price * ( 1 + Interest rate ) Period
= $1,200 * ( 1 + .1% ) 12
=$1,214.479465
Hence, the price of the future is $1,214.479465
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