In the forward price and lease rate chapter, I found two formula about annulized lease rate Annual lease rate = r - 1/T ln(F0,T/S) (F0,T, the foward price, r, is the risk free rate,and S, spot price) Annual lease rate =(1+ r)/(F0,T/S)^1/T -1 What is the difference between them? they are same? And, how to get the second formula? Thanks!
Doubt you’ll need to calcuate a lease rate on the exam but the second one annualizes the forward price premium to make an implication of the lease rate above and beyond the risk-free. It does NOT take into effect compounding The first one does