Assume FT2 = tf11 (1 + T11T2) + T1CT2 is the equilibrium situation. Also assume...
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Assume FT2 = tf11 (1 + T11T2) + T1CT2 is the equilibrium situation. Also assume that T2-T1 is one year, that T1CT2 = $1 and that T1/T2 = 10%. Assume the initial prices are +F11 = 100 & +FT2 = 133. This is not an equilibrium situation. Say the next day, t + 1, the t+1FT1 price adjusts to 115. What would be the equilibrium price for t+1FT2? o None of these represent an equilibrium price for t+1FT2 O 112 O 122 O 127.5
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