The FP they gave was from 30 days ago, shouldn’t it be e^0.0392(30/360) instead of e^ - 0.0392(30/360)? because you have to get the PV for a price from 30 days ago?
I don’t get it…
The only reason why they put a “-” in front of the .0392 is because they are multiplying the e with the spot rate and forward price.
e^0.392 is 1.0399 so you’d end up taking the future value of something instead of the present value if you multiplied it. If you divided it it would be fine.
by doing e^-.0392 you get a “discount factor” of .97 something and when you multiply that against the forward price you get the present value of it.
I understand your point but they didn’t give you a current FP. The FP they gave you was from 30 days ago. so shouldn’t we make it a PV by multiplying instead of discounting?..Or am I missing something?
You want the value now. Its 30 days after a 60 day forward contract was purchased. Thus you have 30 days until the forward settles. So you discount the FP back 30 days with is FP/e^(rfcontinuous*30/360)
OMG, am I the only one who can’t read the question correctly?
In the problem, it says " price of a 60-day S&P 500 forward contact 30 days ago 1433.22"