A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $40 and the risk-free rate of interest is 10% per annum with continuous compounding. a. What are the forward price and the initial value of the forward contract? b. Six months later, the price of the stock is $45 and the risk-free interest rate is still 10%. What are the forward price and the value of the forward contract?
Solved
Show answers
More tips
- S Style and Beauty How to Get Rid of Under Eye Bags?...
- C Computers and Internet How to Get Rid of Windows Genuine Check?...
- C Computers and Internet War of Social Media: Which Platform is the Leader?...
- H Health and Medicine How to Treat the Flu: A Comprehensive Guide...
- O Other What is a Disk Emulsifier and How Does it Work?...
- F Family and Home What does a newborn need?...
- F Family and Home Choosing the Right Car Seat for Your Child: Tips and Recommendations...
- F Food and Cooking How to Get Reconfirmation of Registration?...
- C Computers and Internet How to Get Rid of Spam in ICQ?...
- A Art and Culture Who Said The Less We Love a Woman, the More She Likes Us ?...
Answers on questions: Business
- M Mathematics PLSSS help!! I can t fingure it out...
- E English Science Fiction Becomes a Reality Oftentimes when we think of inventors, we think of scientists, laboratories, and experiments. But before an invention can be tested...
- H History How did the federalist 10 and federalist 51 create a framework for the american government...
- M Mathematics Consider that a barn loft is shaped like a rectangular pyramid, as shown. A) 2,750 ft B) 4,375 ft3 6,425 ft D 13,125 ft?...
- M Mathematics How many correct answers would be needed to get a score of 85% on a math test that has forty questions?...
Ответ:
The correct solution is:
(a) $44.21
(b) $47.30
Explanation:
(a)
According to the question,
Stock price,
S = $40
Risk free rate,
r = 10%
= 0.10
Delivery rate,
t = 1
Mathematical constant,
e = 2.72
Now,
The forward price will be:
⇒
On substituting the estimated values, we get
⇒
⇒
($)
(b)
6 months later,
The forward price will be:
⇒
⇒
⇒
($)
The initial value becomes assumed to be zero (0) since forward contracts constitute procurement deals which really determine the exchanging of a particular property though on a fixed period although at a price that has been accepted today.
Ответ:
Step 1: Set Realistic Goals. Goals for your money will help you make smart spending choices. ...
Step 2: Identify your Income and Expenses. ...
Step 3: Separate Needs and Wants. ...
Step 4: Design Your Budget. ...
Step 5: Put Your Plan into Action. ...
Step 6: Seasonal Expenses. ...
Step 7: Look Ahead
Step-by-step explanation: