BBR is a company which was a late arrival on the BBQ scene. The BBR share price today is 5.70 and the company will pay a dividend of 2% of todays share price in three months and again in nine months. The interest rate is 4.5% compounded quarterly. (i) Calculate the equivalent continuously compounded annual rate for (a) the safe interest rate (call the continuously compounded rate R), and (b) the two dividend payments (call this continuously compounded rate Q). (ii) Use the formula F = S0 e(RQ)T to calculate the one-year forward price of the BBR share

Answer rating: 100% (QA)

To calculate the oneyear forward price of the BBR share we need to first determine the continuously ... View the full answer