Register
)A stock is expected to pay a dividend of $1 per share in two months and in five months. The stock price is $50, and the risk-free rate of interest is 8% per annum with continuous compounding for all maturities.
282,183 views
20 votes
20 votes
)A stock is expected to pay a dividend of $1 per share in two months and in five months. The stock price is $50, and the risk-free rate of interest is 8% per annum with continuous compounding for all maturities. An investor has just taken a short position in a six-month forward contract on the stock. The forward contract is initiated today.

(1) the forward price of the forward contract is $_____ (保留四位小数)

(2) the initial value of the forward contract is $_____ (保留四位小数)

(3) Three months later, the forward price of the stock is 47.9699 for the same forward contract and the risk-free rate of interest is still 8% per annum. The value of the short position in the forward contract is $_____(保留四位小数)

User Masfenix
by
3.1k points

1 Answer

15 votes
15 votes
1. The forward price would be 1.954

2. The initial value of the forward contract is zero

3. In three months the value of the short position in the forward contract is $47.96
User Tyler Gill
by
3.2k points
Ask a Question
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

1.6m questions

2.0m answers

Other Questions

If the rate of inflation in Japan dramatically increases while the rate of inflation in the United States remains constant, then a. the demand curve for dollars shifts to the left. b. the demand curve
If you buy a one-year bond for $4,000 and the issuer pays you back $5,000 at the end of one year, the interest rate on the bond is
From the standpoint of the issuing company, a disadvantage of using bonds as a means of long-term financing is that Group of answer choices bond interest is deductible for tax purposes. interest must be
Elroy Rocket is entering his senior year as an accounting major and has a number of options for his summer break. His options for the 3 month break follow: (1) Work full time at a local accounting firm
In January of the current year, Dora made a gift of stock to her granddaughter. At the time of the gift, the stock was worth $15,000. Several months later in the same year after the gift, a $500 dividend
Link Copied!