User Account

All Pages

What are the forward price and the initial value

Assignment Help Finance Basics
Reference no: EM132611732

A stock is expected to pay a dividend of $1.5 per share in 3 months.

The stock price is $120, and the risk-free rate of interest is 9% per annum with continuous compounding for all maturities. An investor has just taken a short position in a 6-month forward contact on the stock.

(a) What are the forward price and the initial value of the forward contract?

(b) Four months later, the price of the stock is $105 and the risk-free rate of interest drops to 7% per annum. What are the forward price and the value of the short position in the forward contract?

Reference no: EM132611732

Questions Cloud

Prepare journal entries to record the sales transactions : Prepare Journal Entries to record the following sales transactions in Carriage and Tow Company's books. May 6. The correct company paid freight costs of $900
What is the hedge effectiveness : How many futures contracts on asset B should be traded? What is the hedge effectiveness? How can you interpret this number?
Familiarize basic operating system knowledge : Familiarize basic operating system knowledge, for some of you who didn't have experience with Linux or command line
Prepare net cash provided by operating activities section : How do Prepare the net cash provided by operating activities section of the company's statement of cash flows for the year ended December 31, 2021
What are the forward price and the initial value : A stock is expected to pay a dividend of $1.5 per share in 3 months.
What is the amount of the firm ebit : Advantage First Corporation has sales of $4,378,400; income tax of $438,288; the selling, general and administrative expenses of $250,004;
CISO for Amalgamated Widget : You are the CISO for Amalgamated Widget. List arguments Alice might use in favor of SSL. List arguments Tina might use in favor of IPsec.
Calculate the amount of the firm gross profit : Evening Story Corporation has sales of $4,383,257; income tax of $557,691; the selling, general and administrative expenses of $296,793; depreciation
How did wait time affect your overall healthcare experience : Describe a situation in which you found yourself waiting for a healthcare service. From your perspective as a patient, how did the wait time affect your overall

Reviews

Write a Review

Finance Basics Questions & Answers

  Suppose a firm makes the policy changes listed below if a

suppose a firm makes the policy changes listed below. if a change means that external non spontaneous financial

  What is the accounting break-even point

What is the accounting break-even point? and What is the financial break-even point?

  Does the project annual worth indicate

At a corporate MARR of 10% per year, does the project Annual Worth indicate it will make at least the MARR?

  Bottom up analysis of companies current financial situation

HA1022 - Principals of Financial Markets Group Assignment - Conduct a Top Down analysis of the overall economic environment and consider how forecast changes in economic fundamentals will impact on the performances of companies in the industry your..

  Provide brief interpretations of your findings

Assume that Riskfree rate (Rf) = 3.5%, Expected market return (Rm) = 9.5%. Compute the Cost of Equity (Re) for each of the following companies. Provide brief interpretations of your findings. (Note that you can find Betas of these companies using the..

  Stock current value per share

The dividend is expected to grow at a constant rate of 3% a year. The required rate of return on the stock, r is 18%. What is the stock's current value per share? Round your answer to two decimal places.

  Is the no price change scenario a good choice

Schalpfer Inc. is trying to determine whether to give a $15 rebate, to cut the price to $8, or to have no price change on software networking product.

  However government tried hard to stimulate the investment

interest rate varied in different maturities of bond because whether you have a good yield is depending on the type of

  What is the 2011 cash flow to stockholders

If net fixed assets increased by $22,000 during the year, what was the addition to NWC?

  Researcher achieve a high level of accuracy

1. Curbstoning helps the researcher achieve a high level of accuracy.

  Realigning the investments to better match cartman

Or in Cartman's words, she did "cooo." So, instead of realigning the investments to better match Cartman's situation, he just kept things the way they were.

  Find what is the initial investment outlay

The tax rate is 40%. What is the initial investment outlay? Round your answer to the nearest cent.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd