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S&P 500 index has a dividend yield of 3% today. The current index is trading at $1800 and the risk-free interest rate is 5% per annum with continuous compounding. An investor would like to enter into a short one-year forward contract on the index.
A. What would be the fair forward price for this contract?
B. Suppose that six months later, S&P 500 index trades at $2000, the risk-free interest rate is 6% per annum and the annualized dividend yield increased to 4%. What would be the current value of the investor’s short position?
A new European-style floating lookback call option on a stock index has a maturity of 9 months. The current level of the index is 400, the risk-free rate is 6% per annum, the dividend yield on the index is 4% per annum, and the volatility of the inde..
When it matures at the end of 7.5 years it pays out $1,000. If investors wish to earn 2.35% per year on this bond investment, what is the current price of the bond
The interest rate on one year treasury bonds is 1%. the rate on 2 year t-bonds is .9%. the rate on 3 year t-bonds is 1.1%. Using the expectations theory compute the expected one year interest rate in the second year and the third year.
Suppose an Exxon Corporation bond will pay $9,138 41 years from now. If the going interest rate on similar 41-year bonds is 2.26%, how much is the bond worth today? State your answer in whole dollars.
The average unlevered beta of publicly traded Sodium Chlorate businesses is 0.94. Assume zero debt betas. The target capital structure that is appropriate for Collinsville plant is 35% debt and 65% equity. What is the appropriate cost of capital for ..
Landmark Coal operates a mine. During July, the company obtained 500 tons of ore, which yielded 250 pounds of gold and 63,700 pounds of copper. The joint cost related to the operation was $500,000. Gold sells for $325 per ounce and copper sells for $..
Atlantis Fisheries issues zero coupon bonds on the market at a price of $415 per bond. Each bond has a face value of $1,000 payable at maturity in 17 years. What is the yield to maturity for these bonds?
The financial planning process
If Jackson deposits $90 at the end of each month in a savings account earning interest at a rate of 3%/year compounded monthly, how much will he have on deposit in his savings account at the end of 5 years, assuming he makes no withdrawals during tha..
international financenbspcritics of the field of international finance charge that the field is simply corporate
Hanover Tech is currently an all equity firm that has 320,000 shares of stock outstanding with a market price of $19 a share. The current cost of equity is 15.4 percent and the tax rate is 36 percent. First get the value of the unlevered firm. Then c..
Portfolio Return At the beginning of the month, you owned $6,200 of Company G, $8,500 of Company S, and $2,000 of Company N. The monthly returns for Company G, Company S, and Company N were 7.75 percent, -1.55 percent, and -.18 percent. What is your ..
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