Fundamentals of Derivatives Markets 7. The spot price of the
Fundamentals of Derivatives Markets 7. The spot price of the
Fundamentals of Derivatives Markets7. The spot price of the market index is $900. A 3‐month forward contract on this index is priced at $930. The market index rises to $920 by the expiration date. The annual rate of interest ontreasuries is 4.8% (0.4% per month). What is the difference in the payoffs between a long index investment and a long forward contract investment? (Assume monthly compounding)A. $19.16B. $26.40C. $43.20D. $10.84
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