kamara5

cpk123 wrote:
Value of the Future Contract :
ST/(1+RFC)^T-t - F/(1+RDC)^T-t
Let’s not get into value yet, I’m still trying to figure out price…
cpk123 wrote:
if S and F are specified as DC/FC
S0 * [(1+rDC) / (1+rFC) ] ^ T = F
Essentially that’s just the equation I wrote, but rearranged….and I’m still confused. I know this is a very easy formula to memorize, and in fact I already have it memorized, but if I don’t have a solid understanding of HOW the formula works, then I know I’m going to miss questions on the exam.
So, I’m still trying to figure out why the CFAI material is seemingly contradicting itself. If we are reducing the spot price by the amount of interest earned, why isn’t it:  {S0 - [1/(1+rFC)^T]} x (1+rDC)^T  ?? In the equation that they actually give for the price, the spot price doesn’t seem to be reduced by the value of the interest at all, even though that is what they say is going on…