The spot price of an investment asset that provides no income is $30 and the risk-free rate for all maturities (with continuous compounding) is 10%. What is the three-year forward price?
A. $40.50
B. $22.22
C. $33.00
D. $33.16
A
The 3-year forward price is the spot price grossed up for 3 years at the risk-free rate. It is 30e0.1×3 =$40.50 .
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