A Futures Price Is Currently 40 Cents

question 16

Multiple Choice

A futures price is currently 40 cents.It is expected to move up to 44 cents or down to 34 cents in the next six months.The risk-free interest rate is 6%.What is the probability of an up movement in a risk-neutral world?

• A) 0.4
• B) 0.5
• C) 0.72
• D) 0.6

---

Definitions:

Leased Property

Real estate or personal property that is rented under the terms of a lease agreement between the owner and the lessee.

New Owner

A term referring to an individual or entity that has recently taken possession or control of an asset or property.

Covenant Of Quiet Enjoyment

A promise usually in a lease or deed guaranteeing that a tenant's or landowner's use of property will not be disturbed by the landlord or previous owner.

Disturb

To interrupt or negatively affect the normal state or tranquility of something.