cfasf1 Wrote: ------------------------------------------------------- > if it’s continuously compounded, don’t you just go > 1.05^.5? No. See slouiscars example.
ugh, why do I always use LN there? I should freaking no better by now. Geez.
The correct answer is “A” Does anyone know how to get this answer though? Whats the logic behind it?
The correct answer has to be C P = C + K*exp(-rT)-S = 1+22*exp(-0.5*5%)-20 = 2.456818 -> C is the closest one
Use put call parity for future. C + (X - FP) e (-0.05 * 0.5) = p p = 2.95. Notice 20 is future price not spot price. So spot price = 20 * e (-005 * 05);
prob_13 Wrote: ------------------------------------------------------- > The correct answer is “A” > > Does anyone know how to get this answer though? > Whats the logic behind it? where did this question come from?
Oops, we are dealing with futures. My bad, A is the correct answer.
Schweser 2007 Exam 1
DOH!!! SPOILER.
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slouiscar Wrote: ------------------------------------------------------- > dude I don’t know why that struck me as so funny, but it was definitely appreciated.
much easier to just convert continuous rate to a discrete rate and get the answer that way.