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Basic Question 4 of 7
Consider a futures contract that has a life of 136 days. The annual interest rate is 4.75%. If the spot price is $98, the futures price would then be ______.
User Contributed Comments 4
| User | Comment |
|---|---|
| msusolar | why 365 and not 360? |
| Sagarsan88 | Why can't we use 4.75*136/365 here? |
| wpaxtonn21 | Shouldn't it be compounded as: 98( 1 + 0.045/365)^136 = 99.75 |
| Fraser1997 | Msusolar you use 365 since the life of the future is 136 days which is taken as a fraction of a full year. so 136/365. You never really use out of 360. You're likely getting mixed up with FRAs which e.g. for a 90-day LIBOR you'd discount etc... using 90/360. Its not literally 90 days out of 360, what it actually is saying is 3 months/ 12 months, because MRRs such as LIBOR actually look at using a monthly basis as opposed to a daily basis in CFA. |
I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
compare the value and price of forward and futures contracts
explain why forward and futures prices differ
CFA® 2024 Level I Curriculum, Volume 5, Module 6.