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CFA Level 1
Derivatives

Calculating the Forward Price of a Contract

Easy Derivative Pricing And Valuation Forward Contracts

Consider a forward contract entered into by an investor to buy an asset at a future date. The forward price is determined by the spot price of the asset, the risk-free rate, and the time to maturity.

Assume the current spot price of the asset is $100, the risk-free interest rate is 5% per annum, and the time to maturity of the contract is 1 year. Under these conditions, what would be the forward price of the asset?

Hint

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