question archive The spot price of the market index is $900
The spot price of the market index is $900
Subject:FinancePrice: Bought3
The spot price of the market index is $900. A 3-month forward contract on this index is priced at $930. The market index rises to $920 by the expiration date. The annual rate of interest on treasuries is 2.4% (0.2% per month). What is the difference in the profits between an unfunded long index investment and a long forward contract investment? (Assume monthly compounding.)
