Forward contract

CFA Level II
#1

index level 14780 index continously compounded dividend yield 2.76% discrete risk free rate 5.5% compute 6 months forward contract a. 14992 b. 14981 c. 15582

#2

14981

#3

14984

#4

14780 * ex (.055-.0276)*.5= 14983.88 b

#5

0.055 is wrong… since it is a discrete rate - you need to “continuify” it. you need to do ln (1.055) = 0.0535 and use that. if the numbers are closer than what is provided, it could make a difference to your answer.

#6

I see. Thanks CP.

#7

yes B as per CPs explanation

#8

Canyou please check . I’m not getting it. I did : 14780*( exp( (0.0535-0.0276)/2) ) = 14972.65 that’s not 14981. Its driving me crazy

#9

rounding… I too am getting 14972 …

#10
  1. First do r_continuous = ln(1+0.5) 2. F= index x e^r(1/2)/e^divyield(1/2)