Seeing is believing!
Before you order, simply sign up for a free user account and in seconds you'll be experiencing the best in CFA exam preparation.
Basic Question 0 of 7
A forward contract is priced at $129. A European option on the forward contract has an exercise price of $135 and expires in 49 days. The continuously compounded risk-free rate is 3.75% and volatility is 0.25. Calculate the prices of a call option and a put option on the forward contract.
User Contributed Comments 4
| User | Comment |
|---|---|
| danlan2 | 129 is the future price. |
| NIKKIZ | It seems to me that there's a bit missing from the calculation of N(d1). I think it should be: {ln(129/135)+[0.0375+(0.25^2/2)]0.13425}/[0.25 X 0.13425^0.5]. The answer would be -0.39553. Am I missing something? |
| Greatrussian | NIKKIZ: The risk free rate 0.0375 should not be used in the calculation of d1. |
| maxsouto | NIKKIZ: The value of an option can't be less than 0 |
I was very pleased with your notes and question bank. I especially like the mock exams because it helped to pull everything together.
Martin Rockenfeldt
Learning Outcome Statements
describe how value added by active management is measured;
CFA® 2025 Level II Curriculum, Volume 6, Module 38.