Calculate the fair price of a 6 month forward contract

Reference no: EM13289584

The current price of a share of stock is 5, and the stock is expected to pay a dividend of 1 per share in 2 months and again in 5 months. The risk free annual effective rate of interest is 6%.

A) calculate the fair price of a 6 month forward contract.

B) at time 3 months from now, suppose the stock price is 57. Compute the fair price of the same forward contract at that time.

Reference no: EM13289584

Questions Cloud

What is the projects pi : A project has an initial cost of $52,125, expected net cash inflows of $12,000 per year for 8 years, and a cost of capital 12 %. What is the project's IRR? and What is the project's PI?

How much would you need to be paid to enter : Suppose that the current value of a certain asset is $45000. The annual effective rate of interest is 4.5%. You are offered a 2 year long forward contract at a forward price of $50000. How much would you need to be paid to enter into this contract..

Find the two minimum thicknesses : White light is incident normally on a thin soap film ( = 1.33) suspended in air. What are the two minimum thicknesses that will constructively reflect yellow ( = 577 ) light? Enter your answers in ascending order separated by a comma

Calculate m assuming the area of the coil : A 60-turn coil carries a current of 2A and lies in the plane x + 2y- 5z = 12 such that the magnetic moment m of the coil is directed away from the origin. Calculate m, assuming that the area of the coil is 8cm2.

Calculate the fair price of a 6 month forward contract : The current price of a share of stock is 5, and the stock is expected to pay a dividend of 1 per share in 2 months and again in 5 months. The risk free annual effective rate of interest is 6%.

Define sodium sulfate added to the organic solution : why is anhydrous sodium sulfate added to the organic solution remaining after the extractions with 6 M HCL and 6 M NaOH

Find the prepaid forward price and the forward price : Find the prepaid forward price and the forward price of a 30 month forward contract for a stock currently priced at $36, assuming that the risk free rate is 4% compounded continuously and that dividends are paid at continuous annual rate of 2.5%.

What is the total issue size necessary to yield : If a banker's spread is 6.5% of the total issue size, with $60,000 out-of-pocket exp, what is the total issue size necessary to yield 10 million in cash? Use formula.

Determine the indicated temperature of the instrument : A platinum RTD with α = 0.0039 is used with an instrument designed for α = 0.0037. Determine the indicated temperature of the instrument when the actual temperature is 99ºC.

User Account

All Pages