Describe the positions that you would enter to lock

Reference no: EM132179863

Question - Assume that you have agreed a forward contract to buy at the fair forward price in t years on a non-dividend paying stock with spot price S, risk-free interest rates r. Assume there is no cost to borrow the stock. 1.

1. Describe the positions that you would enter to lock in this forward price.

2. What happens if between now and the maturity of the forward contract the company decides to pay a dividend? Do you make money, lose money or are you indifferent to this change? If you make or lose money determine the present value of this amount.

Reference no: EM132179863

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