What is the initial value of this forward contract
Course:- Financial Management
Reference No.:- EM131448237

Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Financial Management

A stock is expected to pay a dividend of $1 per share in two months and again in five months. The stock price is $50 and the risk-free rate is 1% for all times. An investor has taken a short position in a six-month forward contract on the stock. What is the forward price? What is the initial value of this forward contract?

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
An entrepreneur needs funds for a project. She has funds on her own, but enough to cover the required investment of $100. If the entrepreneur doesn't misbehave, the project wi
The current price of HR Consulting common stock is $200 per share. Smart Brokerage Corporation charges a transaction cost of 2.5% of the total amount of a transaction. How muc
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $1,830,000 and will last for 5 years. Variable costs are 37 perce
Kennedy Air Services is now in the final year of a project. The equipment originally cost $34 million, of which 80% has been depreciated. Kennedy can sell the used equipment t
How does an open market sale of Treasury securities by the Fed affect the price of Treasury securities, the yield on Treasury securities, the monetary base, and the money su
Bedrick Co. Can borrow at an interest rate of 7.3% for a period of eight years. Its marginal federal-plus state tax rate is 40%. What is Bedrick's after-tax cost of debt? The
Baltimore, Inc., is a U.S.-based MNC that obtains 10 percent of its supplies from European manufacturers. Sixty percent of its revenues are due to exports to Europe, where its
Assuming Microsoft dividend grows by 3% every year for 10 years and the discount rate is 6%. What is the intrinsic price of Microsoft today and is it more or less than the mar