Forward price and the value of the forward contract

Assignment Help Finance Basics
Reference no: EM132037458

A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $50 and the risk-free rate of interest is 7% per annum with continuous compounding. What are the forward price and the initial value of the forward contract? Nine months later, the price of the stock is $45 and the risk-free interest rate is still 7%. What are the forward price and the value of the forward contract?

Reference no: EM132037458

Questions Cloud

What is the optimal capital structure for managers : What is the optimal capital structure for managers to use for their companies?
Nonconstant growth stock valuation : Nonconstant Growth Stock Valuation Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings.
Equity of what percentage : A firm with sales of $1,000,000, net profits after taxes of $30,000, total assets of $1,500,000, and total liabilities of $700,000 has a return equity?
Does either of the group term policies cause taxable income : Does Richard have adequate life insurance? Does either of the group term policies cause taxable income to Richard and Marianne?
Forward price and the value of the forward contract : What are the forward price and the value of the forward contract?
Describes the role of assessment in diagnosis : Describes the role of assessment in diagnosis and treatment - summarizes your evaluation addressing the current use of psychological tests and the role
Exchange traded funds and smart beta portfolios : The six-page Financial Innovation paper falls into three parts. Exchange Traded Funds [ETF] and Smart Beta Portfolios.
What is the issuance price of the bond : A 10-year zero-coupon bond that yields 6% is issued with a $1,000 par value. What is the issuance price of the bond
The required rate of return equal to the expected return : What is this stock's expected total rate of return (assume market is in equilibrium with the required rate of return equal to the expected return)?

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the pre-tax return on taxable bonds

An investment is available that pays a tax-free 5%. The corporate tax rate is 25%. Ignoring risk, what is the pre-tax return on taxable bonds?

  Body organ system and explain your structure

Choose a type of tissue or body organ system and explain your structure, function, and location (must be detailed and comprehensive) and have your classmates.

  What are the major differences between accounting

What are the major differences between accounting and finance with respect to emphasis on cash flows and decision making?

  Galactosidase present at all times

If the lac operon is repressed in the absence of lactose, why do E. coli cells have small amounts of lactose permease and beta-galactosidase

  Compute how much will each annual payment be

You have decided to place equal year-end deposits in a savings account for the next 7 years. The savings account pays 13.24 percent per year, compounded annually. How much will each annual payment be?

  Automobile mechanic repairs domestic and import cars

An automobile mechanic repairs domestic and import cars. The following table shows the number of cars that have been serviced by age and type.

  How financial planning ensures a consistency

Explain how financial planning ensures a consistency between a firm's financial polies like capital structure, returning cash to shareholders

  Rabie inc has an issue of preffered stock outstanding that

rabie inc. has an issue of preffered stock outstanding that pays a 3.80 dividend every year in perpetuity. if this

  Determine the corresponding differential of buying-selling

Determine the corresponding differential of buying-selling in points. Spot 1.3431-1.3436 One Month 1.3432-1.3442 Three Months 1.3448-1.3463 Six Months 1.3488-1.3508

  What is the market value per share of stock

Industrial Products has total assets of $627,000 and total liabilities of $328,400. The firm has 24,000 shares of stock outstanding and a market-to-book ratio of 5.1. What is the market value per share of stock?

  Case study on solitaire machinery

Solitaire Machinery is a Swiss multinational manufacturing company. Currently, Solitaire's financial planners are considering whether to undertake a 1-year project in the United States.

  What is the value per share of your firm stock

after which growth should be at a constant rate of 6%. The last dividend paid was $1.00. What is the value Per share of your firm's stock?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd