The Spot Price of the Market Index Is $900

question 7

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 2.4% (0.2% 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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Discontinuous Innovation

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