Question: (Pricing a forward contract with dividends) The current price of silver is $206 per ounce. The storage cost is $1 ounce per year, payable quarterly in advance. Assuming a constant annual interest rate of 9% compounded quarterly, what is the theoretical forward price of silver for delivery in 9 months? Please submit your answer rounded to the nearest integer - for example, if your answer is 19.819, round it to either 20.
Question: (Pricing a forward contract with dividends)
The current price of silver is $206 per ounce. The storage cost is $1 ounce per year, payable quarterly in advance. Assuming a constant annual interest rate of 9% compounded quarterly, what is the theoretical forward price of silver for delivery in 9 months?
Please submit your answer rounded to the nearest integer - for example, if your answer is 19.819, round it to either 20.
Forward price refers to the future price that is agreed to be paid by the parties entering in to contract for the specific asset at future date. It is based on the current spot price including carrying costs of assets, storage cost, and interest cost.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
