5. (Equivalency) A young woman uses the ﬁrst procedure described in Section 11.4 to
deduce her utility function U (x) over the range A 5 x 5 B. She uses the normalization
U (A) = A, U (B) = B. To check her result, she repeats the whole procedure over the
3. (Silver contract) At the beginning of April one year, the silver forward prices (in cents
per troy ounce) were as follows:
Apr 406.50
July 416.64
Sept 423.48
Dec 433.84
(Assume that contracts settle at the end of the given month.) The carrying cost of
2. (Proportional carrying charges 0) Suppose that a forward contract on an asset is written
at time zero and there are M periods until delivery. Suppose that the proportional carrying
charge in period k is (15 (k), where S (k) is the spot price of the ass