Question: What would be the value of a forward contract written on a stock priced at $100 that expires in three years, if at the end

What would be the value of a forward contract written on a stock priced at $100 that expires in three years, if at the end of the first year the stock price is $115.50. The commodity requires $5 per year to store and discrete risk-free rate is 4 percent?

a. $9.93

b. $6.49

c. $804

d. $4.65

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Introduction to Derivative Securities. Show me the process please. 1) JP Morgan Chase writes a fonvard contract to sell 10 million pounds sterling at the delivery price 2) 3l 4l 5) of $1.6247 per...

The Adora and Jorge Tun Case A CASH FLOW AND EDUCATION PLANNING CASE Adora and Jorge were married seven years ago when Jorge was thirty-five years old. He met Adora, who was also thirty-five years of...

Evaluate the potential gains and losses for forwards,future,call options,put options and swaps. Outline and describe the different risks that each type of derivative contract faces. Describe...

Financial Engineering and Risk Management-COURSERA, 41 questions 1. Lottery payments A major lottery advertises that it pays the winner $10 million. However this prize money is paid at the rate of...

1. Lottery payments A major lottery advertises that it pays the winner $10 million. However this prize money is paid at the rate of $500,000 each year (with the first payment being immediate) for a...

Hi Guys I need help with my assignment to gain exam entrance. this assignment counts 50% of my year mark. it is due on Monday the 18th of September if possible can I get help by Sunday the 17th??...

RSK4805 Assignment 03 Assignment 03 Written Unique number 630057 Assignment due date 18 September 2017 Contribution to year mark 50% Required: Complete the questions and submit your answers in PDF...

Financial information attached. I'm supposed to project for 2015, 2016, and 2017. I do not understand the question or how to do it. Pro-Forma Financial Statements (I/S, B/S and Statement of Cash...

Required: Refer to the statements and notes and answer the following questions. a) What type of income statement format does the company use (single, multiple step, condensed)? Explain clearly why...

A Mustang is travelling along the highway at a constant 36 m/s [N] when it passes an unmarked police car. It takes the officer 3.0 s to secure his coffee, then he pursues the Mustang with a uniform...

Consider the universe of all polygons with three or four sides, and define the following open statements for this universe. a(x): all interior angles of x are equal e(x): x is an equilateral triangle...

8 . 1 . How are profits and losses calculated? Which situation describes a company experiencing an accounting loss?

A hula hoop and solid disc of equal radii are rolled, from rest and without slipping, down an incline plane. Which one will reach the bottom of the inclined plane first? Explain.

Use the applet entitled Correlation by the Eye to explore the relationship between the pattern of data in a scatterplot and the corresponding correlation coefficient. LO9 a. Run the applet several...

Last name and acquisition timing. Refer to the Journal of Consumer Research (Aug. 2011) study of the speed with which consumers decide to purchase a product, Exercise LO9 9.14 (p. 476). Recall that...

RateMyProfessors.com. A popular Web site among college students is RateMyProfessors.com (RMP). Established over 10 years ago, RMP allows students to post quantitative ratings of their instructors. In...