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Storage and insurance costs on gold are $10.1 per month per ounce and have just been paid. The spot price of gold is $1879.28 per ounce. Calculate the forward price of a forward contract on gold that matures in 5 months. The risk-free rate is 4.21% 4. (B) $1963.09 (A) $2845.13 (C) $2485.12 (D) $2220.11

Storage and insurance costs on gold are $10.1 per month per ounce and have just been paid. The spot price of gold is $1879.28 per ounce. Calculate the forward price of a forward contract on gold that matures in 5 months. The risk-free rate is 4.21% 4. (B) $1963.09 (A) $2845.13 (C) $2485.12 (D) $2220.11

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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**Exercise 4 (choose the closest to what you find)** Storage and insurance costs on gold are $10.1 per month per ounce and have just been paid. The spot price of gold is $1879.28 per ounce. Calculate the forward price of a forward contract on gold that matures in 5 months. The risk-free rate is 4.21% per annum. Options: - (A) $2845.13 - (B) $1963.09 - (C) $2485.12 - (D) $2220.11 *Note:* Option (B) is circled.
Transcribed Image Text:**Exercise 4 (choose the closest to what you find)** Storage and insurance costs on gold are $10.1 per month per ounce and have just been paid. The spot price of gold is $1879.28 per ounce. Calculate the forward price of a forward contract on gold that matures in 5 months. The risk-free rate is 4.21% per annum. Options: - (A) $2845.13 - (B) $1963.09 - (C) $2485.12 - (D) $2220.11 *Note:* Option (B) is circled.
Expert Solution
Step 1: Given:

Here,

SpotPrice of Gold is $1879.28

Risk Free Rate is 4.21%

Storage and Insurance Cost is $10.1 per month

Time Period is 5 months

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