Assume the equilibrium return on a financial instrument is 10 percent, and the instrument pays no dividends
Question:
Assume the equilibrium return on a financial instrument is 10 percent, and the instrument pays no dividends or interest. If the current price is $100 and the expected future price one year from now just increased from $110 to $120, what will happen to the current price? What if the expected future price decreases from $110 to $100?
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If the expected future price increases from 110 to 120 the current price will also increase In this ...View the full answer
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Related Book For 
Financial System Of The Economy Principles Of Money And Banking
ISBN: 9780765622464
5th Edition
Authors: Maureen Burton,Bruce Brown
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