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

---

Definitions:

Risky Behavior

Actions or activities that carry a significant chance of negative or harmful consequences.

Low-Machiavellian

Refers to individuals who are less inclined to manipulate others for their own gain, often displaying more honesty and integrity.

Personal Goals

Individual objectives or aspirations that one seeks to achieve, which can span personal development, academic achievements, or personal satisfaction ends.

Thoughtfully

Acting with consideration or careful reflection, often showing concern for the needs or feelings of others.