What is the fair forward price for this forward contract

Assignment Help Financial Management

Reference no: EM131566428

An investor takes a long position in a 13-month forward contract on a stock, which is expected to pay a $1.50/share dividend in 4 months and another $2.00/share dividend in 10 months. The stock is currently trading at $105 and the risk-free rate is 3% per annum with continuous compounding for all maturities. a) What is the fair forward price for this forward contract? b) After six months, the stock price increases to $111 and the risk-free rate of interest is still 3% per annum. What are the forward price and the value of the forward contract for the investor?

Reference no: EM131566428

Questions Cloud

Classify the types of writers : organize a topic into categories and then provide examples of what characteristics fit into each category

Examine the budget as an effective management tool : evaluate the key role budgets play in the strategic planning process. Be sure to address the following. Examine the budget as an effective management tool.

Explain how strategies support overall corporate business : Identify essential resources required to execute these strategies for increasing competitive advantage.

Exchange your security with the security of your colleague : You have an opportunity to exchange your security with the security of your colleague. Would you make the exchange?

What is the fair forward price for this forward contract : What is the fair forward price for this forward contract? What are the forward price and the value of the forward contract for the investor?

Identify the plaintiff contention of sham peer review : Do an Internet search to find the case and the final appellate court decision that reversed the initial jury finding awarding more than $300 million.

Management is planning to convert an existing warehouse : Primus Corp. management is planning to convert an existing warehouse into a new plant that will increase its production capacity by 45 percent.

Differences in global marketing from marketing to consumers : Identify the similarities and differences in global marketing from marketing to consumers exclusively in the United States

Previously initiated silver futures contract : What should be the current futures price for a previously initiated silver futures contract with remaining life of 14 months

User Account

All Pages