Question: Please explain briefly and show the work 1. A stock has a current price of $20. The risk-free interest rate for a half-year maturity is

Please explain briefly and show the work

1. A stock has a current price of $20. The risk-free interest rate for a half-year maturity is 6% and the dividend rate is 3%. Assume continuous compounding. What is the six-month forward price of the stock?

2. How many years does it take to double your money if the continuously-compounded interest rate is 6%?

3. If you wanted to double your money in the same time as in the answer to the previous question, but were using monthly compounding, what would be the rate of interest you would require?

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!

The number of molecules crossing a unit area per unit time in one direction is given by where n is the number of molecules per unit volume and v is the average molecular velocity. As the average...

7. Suppose you confront the following data for a certain stock: \begin{tabular}{ll} Call price (six-month maturity, exercise price =$30): & $4.167 \\ Put price (six-month maturity, exercise price...

answer each one and make sure to show your work. 1 Federal Reserve Bank (FED) lowered the target for federal funds rate from 5.25% in June 2006 to 0-25% in December 2008. and the target has remained...

I would love some help with this analytical measure!! (Instructions) Perform analytical measures for Columbia Sportswear for the most current year. Complete the Liquidity, Solvency and Profitability...

I would love some help with this analytical measure!! (Below is any information you should need) (Instructions) Perform analytical measures for Columbia Sportswear for the most current year. Complete...

please show your work (2) Company BW has $500,000 loan outstanding. The annual loan interest rate is 6% with monthly compounding (meaning BW is making monthly payments). Find the annual after-tax...

Please help me figure out this Nike Case Study. It is an investment analysis question. I attached the case study to this question. Thank you! An Investment Analysis Case Study: Nike This case is a...

Please answer the questions from the attachment. Show all calculations and do not use a spread sheet. Thank you! YOU MUST SHOW ALL WORK. DO NOT USE A SPREAD SHEET!!! Question 8: The contract interest...

answer the qts and show your work. 1 Federal Reserve Bank (FED) lowered the target for federal funds rate from 5.25% in June 2006 to 0-25% in December 2008. and the target has remained at this level...

BioMarin Pharmaceutical Inc. (Ticker: BMRN) recently issued convert- ible debt on May 11, 2020.1 Convertible debt is a bond that can be transformed from debt into common equity shares if the bond...

PLEASE show all work in excel, thanks! Q1 The current price of American Airlines stock is $6. In the next year, this stock price can either go up by $3.50 or go down by $2. The stock pays no...

Answer Exercise 3.4.27 using the weighted inner product (f,g) (fg)-1 f(x) g(x) (1 + x) dx.

J The Hamiltonian H, for a two dimensional harmonic oscillator can be written in the form H, = (1/2)(p + p) + (1/2)(x + y). 10 + Consider a perturbation H'=(1/2)kaxy(x + y), where is small. 20 E DE...

6.76 In Exercise 6.54 on page 226, the lifetime of a transistor is assumed to have a gamma distribution with mean 10 weeks and standard deviation 50 weeks. Suppose that the gamma distribution...

SIMAD UNIVERSITY Class: BACC25 Subject: Islamic Accounting Instructions: a) Follow The Instructions. Midterm Exam Instructor: All Ibrahim Date: 6-4-2022 b) You Have 1.5 Hrs. To Complete This Test. c)...

Describe how language reflects, builds on, and determines context?

Have you ever found yourself in a situation where you are entirely sure that you are using a term precisely (a good restaurant, a fun party, an affordable car) only to have someone wholeheartedly...

What connotative meanings does each of the following words have for you: religion, divorce, money, exercise, travel, dancing, parenthood? Why do you have the reaction you do to each word?