Question

A SHORT forward contract that was negotiated some time ago will expire in one year and...

A SHORT forward contract that was negotiated some time ago will expire in one year and has a delivery price of $50. The current stock price underlying this forward contract is $40. The risk-free rate with continuous compounding is 8% for all maturities. This stock pays dividend payment of $3 each in 3 months and 6 months, respectively. What is the value of this forward contract?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A short forward contract on an investment asset that yields 7.7% and was negotiated some time...
A short forward contract on an investment asset that yields 7.7% and was negotiated some time ago will expire in 1 months and has a delivery price of $60. The current spot price of the commodity is $63. The risk-free interest rate (with continuous compounding) is 1.8%. What is the value of the short forward contract? An investor shorts 178 shares when the share price is $78 and closes out the position 10 months later when the share price is...
An investor has just taken a short position in a one-year forward contract on a dividend...
An investor has just taken a short position in a one-year forward contract on a dividend paying stock. The stock is expected to pay a dividend of $2 per share in five months and in eleven months. The stock price is currently selling for $100 and the risk-free rate of interest is 8.50% per year with continuous compounding for all maturities. a. What are the forward price and the initial value of the forward contract? The forward price is (sample...
Problem 3: A one-year-long forward contract on a non-dividend-paying stock is entered into when the stock...
Problem 3: A one-year-long forward contract on a non-dividend-paying stock is entered into when the stock price is $50 and the risk-free interest rate is 5% per annum (continuous compounding). (a) What are the forward price and the initial value of the forward contract? (b) Six months after the signing of the forward contract, the price of the stock is $55 and the risk-free interest rate is still 5%. What is the new market forward price for the same contract...
A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price...
A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $40 and the risk-free rate of interest is 10% per annum with continuous compounding. a) What are the forward price and the initial value of the forward contract? b) Six months later, the price of the stock is $45 and the risk-free interest rate is still 10%. What A one-year long forward contract on a non-dividend-paying stock is entered into when the stock...
A stock is expected to pay a dividend of $5 per share in 2 months ....
A stock is expected to pay a dividend of $5 per share in 2 months . At initiation, the stock price is $100, and the risk-free rate of interest is 6% per annum with continuous compounding for all maturities. An investor takes a short position in a 9-month forward contract on the stock. It is calculated for you that the present value of the dividend, i.e. I is 4.95. Six months later, the price of the stock is $90 and...
A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price...
A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $41 and the risk-free rate of interest is 10% per annum with continuous compounding. a. What are the forward price and the initial value of the forward contract? b. Six months later, the price of the stock is $45 and the risk-free interest rate is still 10%. What are the forward price and the value of the forward contract?
A stock is expected to pay a dividend of $1 per share in two months and...
A stock is expected to pay a dividend of $1 per share in two months and in five months. The stock price is $56, and the risk-free rate (with continuous compounding) is 8% for all maturities. An investor has just taken a short position in a seven-month forward contract on the stock.` (1) What are the forward price and the initial value of the forward contract? (2) Three months later, the price of the stock is $50 and the risk-free...
A stock is expected to pay a dividend of $1 per share in two months and...
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. What are the forward price and the initial value of the forward contract? Three months later, the price of the stock is $48 and...
A stock is expected to pay a dividend of $2 per share in three months. The...
A stock is expected to pay a dividend of $2 per share in three months. The share price is $75, and the risk-free rate of interest is 8% per annum with continuous compounding for all maturities. An investor has just taken a long position in a six-month forward contract on a share of stock. Three months later, immediately after the payment of the dividend, the price of the stock is $90 and the risk-free rate of interest is still 8%...
A stock is expected to pay a dividend of $2 per share in three months. The...
A stock is expected to pay a dividend of $2 per share in three months. The share price is $75, and the risk-free rate of interest is 8% per annum with continuous compounding for all maturities. An investor has just taken a long position in a six-month forward contract on a share of stock. a) What are the forward price and the initial value of the forward contract? b) Three months later, immediately after the payment of the dividend, the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT