A stock is expected to pay a dividend of $1 per share in 2 months and in 5 months. The stock price is $60, and the risk-free rate of interest is 5% per annum with continuous compounding for all...


A stock is expected to pay a dividend of $1 per share in 2 months and in 5 months. The stock price is $60, and the risk-free rate of interest is 5% per annum with continuous compounding for all maturities. An investor has just taken a short position in a 6-month


1. What are the forward price and the initial value of the forward contract? [Hint: what's the value of a forward contract at the initiation of the contract?


2.Three months later, the price of the stock is $52 and the risk-free rate of interest is still 8% per annum. What is the forward price of a new forward contract with the same expiration date as above? What is the value of the short position in the old



Jun 08, 2022
SOLUTION.PDF

Get Answer To This Question

Related Questions & Answers

More Questions »

Submit New Assignment

Copy and Paste Your Assignment Here