Use the website cmegroup.com for the following: 3.If the spot price for an asset

Question

Use the website cmegroup.com for the following:

3.If the spot price for an asset is $100 and the 2-year forward price is $106, what is the implied repo rate (quoted on an annualized basis) on the asset assuming no carry cost or underlying yield on the asset?____________________

4'The Euro is trading at $1.16 in the spot market. If the US 3-month risk free rate is 1.45% and the 3-month Euro risk-free rate is 0.25%, what should be the price of the 3-month forward currency contract?____________________

Explanation / Answer

3)% inplied repo rate = (106-100)/100*1/2 = 0.03 rate of return/2 0.03 = 3% 4) price of forward contract = 1.16*((1+1.45%)/4)/(1+0.25%)/4) = 1.1634

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