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Sfm with basic mathes
spot price of a commodity 400
what should b 3ms forward price if interest rate is 6% p.a. compounded continously use[e to the power .03=1.03045]
what I don't understand is e0.03 to the power 1/2
Replies (2)
if u invest 400 in bank. you will get 400+6% but it will be simple compounding. same way in share market youget 400+6% in futures. but it is not simple compounding. its daily compounding aka continous compounding.
Its for 6months and 6% therefore 6/12 so its 0.5 I.e. 1/2
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