Assume the spot price of gold is $750 per ounce,the 1-year forward price is $770,and the annual interest rate is 4.5%.What is the price of a zero-coupon note paying 1 ounce of gold in one year?

Question

Quizplus · Accepted Answer

The price of a zero-coupon note paying 1 ounce of gold in one year can be calculated using the formula for the present value of a future payment: $PV = \frac{FV}{(1 + r)^n}$, where $PV$ is the present value, $FV$ is the future value, $r$ is the annual interest rate, and $n$ is the number of years. Here, $FV = $770$, $r = 4.5\% = 0.045$, and $n = 1$. Thus, $PV = \frac{770}{(1 + 0.045)^1} = \frac{770}{1.045} \approx $736.84$. Therefore, the closest answer is $736.

Assume the Spot Price of Gold Is $750 Per Ounce,the