Welcome to the hotseat. We've prepared a guide if you'd like to read more about how it works.
0 votes
in BUS 2016H - Financial Mathematics by

  Q2 b). I figured V(s)=-V(l) so I found V(l) = (Kr-Ko)e^(T-r). The value  I got for V(s) was 0.9581. I had Ko = 47.8967 and Kr = 46.92. In both Ko and Kr I had taken the R2 income into account. However, the final answer I'm supposed to get is apparently 0.99966. I'm not too sure where I'm going wrong.

1 Answer

0 votes
by (300 points)

K0 should give you an answer of 47.9731 and Kr should give you an answer of 46.96 . Considering your answers are so similar - are you not maybe rounding?

\[ Vs = (K0 − K3) e^−0.08× 3/12 = 0.996689 = R1 \]