The Spot Price of the Market Index Is $900

question 14

Multiple Choice

The spot price of the market index is $900. A 3-month forward contract on this index is priced at $930. The annual rate of interest on treasuries is 4.8% (0.4% per month) . What annualized rate of interest makes the net payoff zero? (Assume monthly compounding.)

• A) 4.8%
• B) 8.5%
• C) 11.2%
• D) 13.2%

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