In Question 2, why did we calculate the present value of the security to time 0 not 8/12 months if the contract is negotiated at time 8/12?

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The memo solution is in fact incorrect.

The correct solution is as follows:

$$P = v^{\frac{2}{3}}(5\ddot{a}_{\overline{19}|}+120v^{18}) = 142.26$$

$$I = v^{\frac{2}{3}}(5+5v+5v^2) = 14.29$$

$$K=(P-I)e^{0.05\text{x}1.5} = 137.93$$

where the basic time unit is 6 months.

Hence the forward price per R90 000 nominal is R124 140.

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