The Spot Price of an Asset Is $50

question 23

Multiple Choice

The spot price of an asset is $50.The expected return on the asset is 10% a year (in simple terms) and the standard deviation of these returns is 20%.The risk-free rate of interest is 5% a year in simple terms.Assuming no costs or benefits of carry,what is the one-year forward price of the asset?

• A)$52.50
• B)$55.00
• C)$57.50
• D)$60.00

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Definitions:

Kinetic Control

A condition in which the rate at which reactants are converted into products determines the predominant product, influenced by factors like temperature and reaction time.

HBr

A corrosive, gaseous compound used in the production of inorganic and organic bromine compounds and as a catalyst in some types of chemical reactions.

Dienes

Organic compounds containing two double bonds, which may vary in their arrangements and contribute to the compound's reactivity, particularly in polymerization and Diels-Alder reactions.

Major Product

The product of a chemical reaction that is formed in the greatest quantity, as determined by the reaction conditions and mechanism.