Consider the Following What Should Be the Proper Futures Price for a 1-Year

question 18

Multiple Choice

Consider the following: $$\begin{array}{l}\begin{array} { l l r } \text {Risk-free rate in Canada }&0.04 \text { year } \\\text {Risk-free rate in Switzerland }&0.03 / \text { year } \\\text {Spot exchange rate }&1.67 \mathrm{SF} / \$\end{array}\end{array}$$
What should be the proper futures price for a 1-year contract?

• A) 1.703 SF/$
• B) 1.654 SF/$
• C) 1.638 SF/$
• D) 1.778 SF/$
• E) 1.686 SF/$

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Definitions:

Amortizes

The process of gradually writing off the initial cost of an asset over a period, effectively spreading the cost over its useful life.

Accrued Interest

Accrued interest is the interest on a loan or bond that has accumulated since the principal investment or last payment period but has not yet been paid.

Interest Expense

The cost incurred by an entity for borrowed funds, typically presented as an expense on the income statement.

Amortization

The process of spreading the cost of an intangible asset over its useful life.