Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. a 9-month short position of a forward contract on

A 9-month short position of a forward contract on a stock is entered into today, when...

80.2K

Verified Solution

Question

Accounting

A 9-month short position of a forward contract on a stock isentered into today, when the stock price is $60. The stock hasexpected dividends of $1.0 in 2 months, $2.0 in 5 months, and $2.0in 7 months respectively. The risk-free interest rate is 3.0% perannum with continuous compounding.

(a) What is the forward price today?
(b) What is the initial value of the forward contract today?

(c) 3 months later, the price of the stock decreases to $55 andthe risk-free interest rate remains the same. What are the forwardprice and the value of the forward position then?


Question 3
A 9-month short position of a forward contract on a stock isentered into today, when the stock price is $60. The stock hasexpected dividends of $1.0 in 2 months, $2.0 in 5 months, and $2.0in 7 months respectively. The risk-free interest rate is 3.0% perannum with continuous compounding.
(a) What is the forward price today?
(b) What is the initial value of the forward contract today?
(c) 3 months later, the price of the stock decreases to $55and the risk-free interest rate remains the same. What are theforward price and the value of the forward position then?

?no more information.?

Answer & Explanation Solved by verified expert
4.4 Ratings (792 Votes)
I hope    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Which congruence shortcut proves that the two triangles are congruent Angle side angle Side angle...

Geometry
Q

You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources,...

Finance
Q

A survey of 23 grocery stores revealed that the average price of a gallon of milk...

Basic Math
Q

1 The point P is on the unit circle The x coordinate of P is...

Geometry
Q

You have the functions f(x) = 3x + 1 and g(x) = |x 1|i) Let...

Algebra
Q

Bond Valuation and Yield ...

Accounting
Q

At the beginning of the current period, Pukalani Corporation had balances in Accounts Receivable of...

Accounting
Q

BMCC Fall 2020 Homework #3 (1) (Protected View] - Excel (Unlicensed Product) Ga Share...

Accounting
Q

11. Please define enterprise resource planning (ERP), as well as define cash equivalents

Accounting
Q

individual or component costs of capitan Your fem is considering a new investment proposal and...

Finance
Q

Exercise 1. (10 points) Selected financial information from Syvitex Corporation is reproduced below. NOA tumorer...

Finance
Q

Accounting