- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 33. Pricing and Valuation of Forward Commitments
- Subject 2. Carry Arbitrage

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**CFA Practice Question**

Three months ago, an investor entered into a six-month forward contract to sell a stock. The delivery price agreed to was $55. Today, the stock is trading at $45. Suppose the three-month interest rate is 4.80% in continuously compounded terms. Assuming the stock is not expected to pay any dividends over the next three months, what is the current forward price of the stock?

A. 45.5433

B. 50.9395

C. 56.3360

**Explanation:**The current forward price is 45 * e

^{(0.048 * 3/12)}= 45.5433.

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