A futures on a stock with six months to expiration is currently selling for $108.32. If the risk-free rate of interest is 5.1 percent, what is the stock price?
A) $106.13
B) $105.66
C) $105.89
D) $107.20
E) $111.05

Question

Quizplus · Accepted Answer

We can use the formula: 
Futures price = Spot price x e^(r x t)
where r is the risk-free interest rate, t is the time to expiration in years. 
Plugging in the given values,
$108.32 = Spot price x e^(0.051 x 0.5)
Spot price = $105.66 (rounded to the nearest cent)

A Futures on a Stock with Six Months to Expiration