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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Question
An investor holds title to an asset worth $335.25. To raise money for an unrelated purpose, the investor plans to sell the asset in 12 months. The investor is concerned about uncertainty in the price of the asset at that time. The investor learns about the advantages of using forward contracts to manage this risk and enters into such a contract to sell the asset in 12 months. The risk-free interest rate is 9 percent. The appropriate price the investor could receive in 12 months by means of a forward contract would be:
a. $307.57
b. $365.42
c. $357.63
d. $398.31
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