8 Consider a security that sells for$ 1 , 0 0 0 today. A forward contract on
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Question:
Consider a security that sells for$ today. A forward contract on this security that expires in one year is currently procedure at $ The annual rate of interest is percent assume that this is an off market Forward contract
A Calculate the value of the forward contract today V OT
B Indicate whether payment is made by the long to the short or vise versa
Assume that you own a security currently worth $ You plan to sell it in two months. To hedge against a possible decline in price during the next two months. You enter into a forward contract to sell the security in two months. The risk free rate is percent.
A Calculate the forward price on this contract
B Suppose the delear offers to enter into a forward contract at $ Indicate how you could earn arbitrage profit
C After one month, the security sells for $ Calculate the gain or loss to your position
Related Book For
Linear Algebra And Its Applications
ISBN: 9781292351216
6th Global Edition
Authors: David Lay, Steven Lay, Judi McDonald
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