If you read both questions they have given two different interest rate per annum. But why did use a different approach while calculating forward contract price. In year 2010 question Ko=(700-20(1.05)^t)*1.05^t*1.03^t But in year 2011 Ko=(68-2.50e^-0.14*t)e^0.14*t Why only 1.05 again multiplied with 1.03 in 2010 year question. Is it due to a month spot rate given? Or there could be another reason's??
it's the same method, just different interest rates to work with. In the first question, you have two risk free rates relevant at issue, time 0. A 1-month spot rate and the subsequent forward rate. In the second question, there's only one risk-free rate to use in January. The second rate is a new rate to use when we physically get to April.
