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An investment asset provides an income of $1 at the end of the first year and at the end of the second year, its spot price is $20 and the risk-free rate for all maturities (with continuous compounding) is 10%.

a. What is the four year forward price?

b. What is the value of this forward contract two years later if the forward price at that time is $25?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92068670

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