A stock is expected to pay a dividend of $3 per share in 2 months and...
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A stock is expected to pay a dividend of $3 per share in 2 months and in 5 months. The current price of the stock is $100. The risk-free rate is 6%. You have a short position in a 6-month forward contract. (i) (ii) Find the current forward price. What is the value of this forward contract? What is the value of this forward contract four month later if the stock price is $90? A stock is expected to pay a dividend of $3 per share in 2 months and in 5 months. The current price of the stock is $100. The risk-free rate is 6%. You have a short position in a 6-month forward contract. (i) (ii) Find the current forward price. What is the value of this forward contract? What is the value of this forward contract four month later if the stock price is $90?
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Answer rating: 100% (QA)
To find the current forward price we can use the costofcarry model which takes into account the divi... View the full answer
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0133400694
1st canadian edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford, David A. Stangeland, Andras Marosi
Posted Date:
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