A short forward contract on a dividend-paying stock was entered some time ago. It currently has...
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A short forward contract on a dividend-paying stock was entered some time ago. It currently has 9 months to maturity. The stock price and the delivery price is $25 and $24 respectively. The risk-free interest rate with continuous compounding is 8% per annum. The underlying stock is expected to pay a dividend of $2 per share in 2 months and an another dividend of $2 in 6 months. (a) What is the value of this forward contract? What is the delivery price? (b) One month later, the price of the stock is $28 and the risk-free rate of interest is 9% per annum. What are the forward price and the value of this short position in the forward contract? A short forward contract on a dividend-paying stock was entered some time ago. It currently has 9 months to maturity. The stock price and the delivery price is $25 and $24 respectively. The risk-free interest rate with continuous compounding is 8% per annum. The underlying stock is expected to pay a dividend of $2 per share in 2 months and an another dividend of $2 in 6 months. (a) What is the value of this forward contract? What is the delivery price? (b) One month later, the price of the stock is $28 and the risk-free rate of interest is 9% per annum. What are the forward price and the value of this short position in the forward contract?
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Part a Value of the Forward Contract and Delivery Price Given Stock price Spot price 25 Delivery price Forward price 24 as mentioned delivery price is ... View the full answer
Related Book For
Advanced Accounting
ISBN: 978-0538480284
11th edition
Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Posted Date:
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