Can someone please tell me where I went wrong in this question. 'An asset has a current price of 100p. It will pay an income of 5p in 20 days time. Given a risk-free rate of interest of 6% per annum convertible half-yearly and assuming no arbitrage, calculate the forward price to be paid in 40 days.' The correct answer is 95.63. I have shown my workings below. K= (S-I) e^(delta x T) K= [ 100 -5 x e^(-0.05912 x 20/365)] e^(0.05912 x 40/365) K=[100-5(4.9838)](1.0065) k=75.57p where delta=ln(1+i)=ln(1.0609)=0.05912. I'm pretty sure it's with the calculations, but where? It seems right no matter how many times I do it. Thank you.I'd really appreciate it. Kind regards Sanjay.
Apologies Sanjay for the delay. If you don't get a response, then it might be worth messaging the tutor responsible for the forum - especially during the busy block teaching period. 5 x e^(-0.05912 x 20/365) = 4.9838 You then multiplied by the 5 again.
