The Spot Price of an Investment Asset Is $30 and the Risk-Free

question 3

Multiple Choice

The spot price of an investment asset is $30 and the risk-free rate for all maturities is 10% with continuous compounding.The asset provides an income of $2 at the end of the first year and at the end of the second year.What is the three-year forward price?

• A) $19.67
• B) $35.84
• C) $45.15
• D) $40.50

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Definitions:

Air-Conditioning

A system designed to control the temperature, humidity, and quality of air in a building or vehicle, improving comfort.

Heating Maintenance

The routine service and care conducted to ensure a heating system functions efficiently and safely.

Memorandum

A written record or communication used in business or diplomacy to officially document and share information.

Oral Contract

An agreement between parties that is spoken and not formally recorded in writing, yet is still legally binding under certain conditions.