Calculate the arbitrage free futures price

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An asset is selling for $250. A Futures contract with the asset as underlying, expires in 8 months (assume 365 day year). Interest rates are 5% per annum and the future value of cost of carry has been calculated to be $5.35 and is net any convenience yield earned over the time period.

(A) Calculate the arbitrage free futures price.

(B) A month has passed; the contract expires in 7 months. The asset sells for $239, and net cost of carry is $4.00. Interest rates are stable at 5% Calculate price and profit or loss over the one month period of time.

(C) At expiration the cash market is showing a price of $229. Interest rates are 5%, contracts with 6 months till expiration, are showing cost of carry of $6.16. Calculate price and profit from the futures contract.

Reference no: EM132072671

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