Calculate the appropriate price

Assignment Help Finance Basics

Reference no: EM13980938

Consider an asset currently worth $100. An investor plans to sell it in one year and is concerned that the price may have fallen significantly by then. To hedge this risk, theinvestor enters into a forward contract to sell the asset in one year. Assume that therisk-free rate is 5 percent.

A. Calculate the appropriate price at which this investor can contract to sell the asset in one year.

Reference no: EM13980938

Questions Cloud

How long would take claudia working alone to paint room : On a particular day, the campus bookstore sold 30 T-shirts. White ones cost $9.95 and yellow ones cost $10.50. Total sales of T-shits were $310.60. How many white shirts were sold? If working alone, Marcus can paint a room in 3.15 hours. Working toge..

Strict residual dividend policy : Red Zeppelin Corporation follows a strict residual dividend policy. Its debt-equity ratio is 2.5. a. If earnings for the year are $190,000, what is the maximum amount of capital spending possible with no new equity?

Describe the main characters in the observed movie section : Mention the name of the movie. Describe the setting and overall storyline of the movie. Describe the main characters in the observed movie section. Describe the situation that you analyzed and interpret the action of the characters depicting social ..

For each of the algebra problems : For each of the algebra problems below, round your answer to 2 decimal places and record your answer on D2L without (if applicable) a comma. Thus, enter 3.24765 as 3.25 or .18763 as 0.19 or 3,214.842876 as 3214.85.

Calculate the appropriate price : Calculate the appropriate price at which this investor can contract to sell the asset in one year.

Calculate the cost of giving up this discount to atlantic : Atlantic Company buys merchandise from their suppliers on credit. They must pay the total amount due within 50 days of purchase. However, if the pay their bill within 12 days the would be able to take a discount of 4% off of the total purchase price...

Annual interest payment on the second issue : Both issues pay interest annually. What is the annual interest payment on the second issue?

Decision influence ultimate amount of cash you will collect : It is a common fact that many lottery winners are “broke” sooner than later. If you won a $1,000,000 lottery, would you want to collect the lump sum winnings today or receive the monies over time? How does your decision influence the ultimate amount ..

Describe the main characters in the observed movie : Mention the name of the movie. Describe the setting and overall storyline of the movie. Describe the main characters in the observed movie section

User Account

All Pages