Question: A 9-month forward contract is issued on 1 March 2011 on a stock with a price of 9.56 per share at that date. Dividends of

A 9-month forward contract is issued on 1 March 2011 on a stock with a price of 9.56 per share at that date. Dividends of 20 pence per share are expected on both 1 April 2011 and 1 October 2011.

(a) Calculate the forward price, assuming a risk-free rate of interest of 3% per annum effective and no arbitrage.

(b) Explain why the expected price of the share in 9 months time is not needed to calculate the forward price.

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!

Roedel Electronics produces tablet computer accessories, including integrated keyboard tablet stands that connect a keyboard to a tablet device and holds the device at a preferred angle for easy...

An eleven month forward contract is issued on 1 March 2008 on a stock with a price of 10 per share at that date. Dividends of 50 pence per share are expected to be paid on 1 April and 1 October 2008....

An 11-month forward contract is issued on 1 March 2008 on a stock with a price of 10 per share at that date. Dividends of 50 pence per share are expected to be paid on 1 April and 1 October 2008....

A 3 - month forward contract is issued on 1 February 2 0 0 1 on a stock with a price of $ 1 5 0 per share. Dividends are received continuously and the dividend yield is 3 % per annum. In addition, it...

A ten-month forward contract was issued on 1 September 2018 for a share with a price of 10 at that date. Dividends of 1 per share are expected on 1 December 2018, 1 March 2019 and 1 June 2019....

Hello found this exam on here, however there is no answer on it. 1). I would like all answers. 2). on a WORD DOCUMENT, please show every step for each problem. I would like to get a full...

Please give me solutions to those problems. Document is attached below. Thank you Exam 1 Question 1 Carly Corporation issued $300,000 of 30-year, 8% bonds at 106 on January 1, 1 2016. Interest is...

.It's my midterm exams please There are two segments of the market represented by demand relationships: Q = 90 3p and Q = 180 6p. There's a constant marginal cost of $10 to serve the market. There...

Am Abit stuck , Please solve Five years ago, an insurance company began to issue insurance policies covering medical expenses for dogs. The insurance company classifies dogs into three risk...

Based on the following information in the pictures, Please solve the following questions (detailed solving steps is needed). if the numbers i wrote in red are not clear or do not make sense you can...

10. Neighbor Software Corp. has assembled the following data for the years ending December 31, 2021 and 2020. '(Click the icon to view the current accounts.) Requirement (Click the icon to view the...

Comp America completed the following inventory transactions during the month of March: Requirements 1. Without resorting to calculations, determine which inventory method will result in Comp America...

Refer to Exercise 10.10. Perform a test of hypothesis that is intended to show that the mean for magazine 1 is more than 2 words larger than the mean for magazine 2. (a) Formulate the null and...

13. At the end of the year, Falabella Co. has pretax financial income of $550,000. Included in the $550,000 is $70,000 interest income on governmental bonds, a $25,000 fine for dumping hazardous...

Add "Viggo Mortenslet cast = new Map ( ) ;en " to the cast as the key, with value "Aragorn".