If the Risk-Free Rate Is R and Price of a Nondividend

question 7

Multiple Choice

If the risk-free rate is r and price of a nondividend paying stock grows at rate m with volatility s,at what rate does a forward price of the stock grow for a forward contract maturing at a future time T.

• A) m
• B) m−s2/2
• C) m−r
• D) r−s2/2

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