Question

GOOG currently trades for $687 per share and pays a dividend of $9 in six months....

GOOG currently trades for $687 per share and pays a dividend of $9 in six months. The riskless rate of interest is 5% per year c.c. What is the fair value of a futures contract on GOOG maturing in 14 months?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

  

_______________________________

_______________________________

Present Value of Dividend = Dividend * e^(-r*t)

= 9 * e^(-0.05*0.5)

= 9 * 0.97530991202

= 8.78

Future Value of GOOG = (Current Price - Dividend) * e^(r*t)

r = 0.05

t = 14/12 = 1.166666666666

= (687 - 8.78) * e^(0.05*1.16666666666)

= 678.22 * 1.06006829292

= 718.96

NOTE: Do upvote the answer, if this was helpful.

NOTE: Please don't downvote directly. In case of query, I will solve it in comment section in no time.

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
GOOG currently trades for $687 per share and pays a dividend of $9 in six months....
GOOG currently trades for $687 per share and pays a dividend of $9 in six months. The riskless rate of interest is 5% per year c.c. What is the fair value of a futures contract on GOOG maturing in 14 months?
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 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...
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 $2.50 per share in two (2) months,...
A stock is expected to pay a dividend of $2.50 per share in two (2) months, in six(6) months and in eight(8) month. The stock price is $66, 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 nine-month forward contract on the stock. What are the forward price and the initial value of the forward contract? Five (5) months later, the price of...
Suppose that an Intel single-stock futures contract expires in four months. The stock pays a dividend...
Suppose that an Intel single-stock futures contract expires in four months. The stock pays a dividend in two months. We have the following information. Annualized, continuously compounded risk-free interest rate for 2-month period: r = 3.4%. Annualized, continuously compounded risk-free interest rate for 4-month period: r = 6.96%. Current spot price of Intel stock: $29 per share. Dividend per share of $0.38 in two months. What must the futures price equal in order than no arbitrage opportunity exist?
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...
Paper Corporation currently pays a dividend of $2 per share, and this dividend is expected to...
Paper Corporation currently pays a dividend of $2 per share, and this dividend is expected to grow at a 15 percent annual rate for three years, and then at a 10 percent rate for the next three years, after which it is expected to grow at a 5 percent rate forever. What value would you place on the stock if an 18 percent rate of return was required? (make a timeline)
A company currently pays a dividend of $3.2 per share (D0 = $3.2). It is estimated...
A company currently pays a dividend of $3.2 per share (D0 = $3.2). It is estimated that the company's dividend will grow at a rate of 16% per year for the next 2 years, and then at a constant rate of 5% thereafter. The company's stock has a beta of 1.1, the risk-free rate is 7.5%, and the market risk premium is 4.5%. What is your estimate of the stock's current price?
Carma Corp. currently pays a dividend of $0.85 per share. In addition, Carma’s market beta is...
Carma Corp. currently pays a dividend of $0.85 per share. In addition, Carma’s market beta is 2.2 when the risk free rate is 5% and the expected market premium is 7%. Estimate the intrinsic value of Carma Corp. using the dividend discount model under each of the following separate assumptions: a. The dividend is expected to last into perpetuity. b. The dividend will be $0.95 next year and then will grow at a rate of 5% per year. c.   ...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT