Your answer: D was correct! An interest rate cap is a package of European-type call option (called caplets) on a reference interest rate. Nice job all! One more calculation and I will let you off the hook: An index is currently 876, the risk-free rate (Rf) is 7%, and the dividend yield on the index portfolio is 1.8%. Assuming that these are continuously compounded yields, the price of an 18-month index future is closest to: A) 945.2. B) 943.0. C) 944.3. D) 947.1.
D. They’re already continuously compounded.
947.06 - D it is.
D as in Damn, it’s 9pm on saturday night and my life is so pathetic that I’m working CFA problems with my ifriends.
formula for that one? i have not memorized jack in futures yet.
Your answer: C was incorrect. The correct answer was D) 947.1. FP = 876 e(0.07-0.018)1.5 = 947.1. Forgot to use the logarithmic version 
Ozzy just wait for 27 days from now. Then you can go back to your real friends 
S0 * e^[(Rf - DY)*T]
i am way cuter than your real friends. stick with me.
This level more than L1, spending time on this board is the only way I’m going to pass. There is no way I would still be working problems tonight if I weren’t on AF.
ozzy609 Wrote: ------------------------------------------------------- > This level more than L1, spending time on this > board is the only way I’m going to pass. There is > no way I would still be working problems tonight > if I weren’t on AF. Amen to that.
OK Dwight…riddle me this. he theoretical question of whether futures prices are unbiased predictors of future spot rates focuses on: A) whether futures buyers are taking on asset owners’ price risk. B) the correlation between interest rate changes and asset price changes. C) whether futures markets are efficient. D) the relation between asset cash flows and the risk-free rate of interest.
that’s way over my head, but I’ll pick D anyway.
not sure why, but I’ll guess A
no idea, i’ll lob an A up there.
A or C
Interesting question. I’m definitely agreeing with A on my first look. Did you make this one up?
Banni go to bed…You are killing all the questions here.
Ouch found the answer in Schweser. Not A. Anyone want to hazard another guess?
Dwight Wrote: ------------------------------------------------------- > Ouch found the answer in Schweser. Not A. Anyone > want to hazard another guess? Um…
make my night dwight. tell me it’s D.