#241easyFinance
Forward Price No-Arbitrage
Asked at:Optiver
Problem
A stock currently trades at $100 (spot price). The continuously compounded risk-free interest rate is 5% per year. The stock pays no dividends.
What is the no-arbitrage forward price for delivery in 6 months?
If the forward were trading at $104, describe the arbitrage trade.
Enter the forward price as a decimal rounded to 4 decimal places.
Constraints
- •Spot price S = $100
- •Risk-free rate r = 5% (continuously compounded)
- •Time to delivery T = 0.5 years
- •No dividends
- •Output rounded to 4 decimal places
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