NEED HELP WITH THSI QUESTION!! WITH
EXPLANATIONS
Forward price=(Stock Price-Present value of
dividends)*e^(r*forward expiry in years)=(Stock
Price-Dividend*e^(-r*time to dividend in years))*e^(r*forward
expiry in years)=(50-1*e^(-5%*0.5))*e^(5.5%*1)=51.7965762
NEED HELP WITH THSI QUESTION!! WITH EXPLANATIONS The current price of a stock is $50. The...
NEED HELP
1. The current stock price is $50. Consider a call and a put option on this stock with 1 year to maturity. If the interest rate is 8% per annum continuously compounded, at what strike price would the prices of the call and put options be the same? A. $43.18 B. $46.15 C. $54.16 D. $57.33 E. $60.12
1. The stock of RUSH Music Enterprises (RUSH) has a current spot price of 100. RUSH stock pays a quarterly dividend of 3.50. The next dividend is payable in 2 months. The continuously compounded risk free interest rate is 5%. Calculate the price of a 9 month Prepaid Forward contract on the stock of RUSH. 2. The R40 Index pays dividends at a continuous rate of 3%. The current price of the R40 Index is 1500. The continuously compounded risk...
4. The current spot price of the stock of Fly By Night Industries is 150. Fly By Night Ind. pays a quarterly dividend of 3. The next dividend will be paid in two months. The risk free interest rate compounded continuously is 5%. Calculate the forward price for a one year forward contract. 5. The one year forward price for the stock of The Moving Pictures Moving Company (Ticker Symbol YYZ) is 296.53. YYZ pays a quarterly dividend of 10...
The current stock price of a non-dividend-paying stock is $50, the risk-free interest rate is 10% per annum, and the volatility is 30% per annum. a) According to the BSM model what is the price of a three-month European put option with a 2. strike of $50? What would be the price of this option if the stock is expected to pay a dividend of $1.50 in two months? b)
Consider a forward contract to purchase a non-dividend-paying stock in 6 months. Assume the current stock price is $34 and the continuously compounded risk-free interest rate is 6.5% per annum. a. Explain the arbitrage opportunities if the forward price is $37 in the market. b. Explain the arbitrage opportunities if the forward price is $33 in the market.
Question 1 - (25 points) (a) Consider a 2-year forward contract to buy a coupon-bearing bond that will mature 2 year from today. The current price of the bond is $102. Sup- pose that on that bond 4 coupon payments of $6 are expected after 6 months, 12 months, 18 months and 24-months. We assume that the 6-month, 12- month, 18-month and 24-month risk-free interest rates (continuously com- pounded) are, respectively, 1%, 1.3%, 1.6% and 1.9% per annum. Determine the...
5. Suppose that the current value of the S&P 500 stock index is USD 2600. Assume that the per annum rates of interest in USD and GBP(British Pound) are respectively 3% and 2% on a continuously compounded basis, and that the S&P 500 index pays a continuous dividend rate of 2% per annum. Finally, the spot exchange rate is USD1.3 per GBP. a) Compute the forward price of the S&P 500 in USD for delivery in one year. for delivery...
Exercise 3. A short forward contract on a dividend-paying stock was entered some time ago. It currently has 9 months to maturity. The stock price and the delivery price is s25 and $24 respectively. The risk-free interest rate with continuous compounding is 8% per annum. The underlying stock is expected to pay a dividend of $2 per share in 2 months and an another dividend of $2 in 6 months. (a) What is the (initial) value of this forward contract?...
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12. Stock P has a price of $150 per share. The stock will pay a $D dividend per share in 7 months from now. The continuously compounded risk free rate of interest is 5%. The six month prepaid forward price is $132. Calculate D.
Consider a forward contract to purchase a coupon-bearing bond whose current price is $900. Suppose the forward contract matures in 9 months. Assume the coupon payment of $40 is expected after 4 months. Assume that the 4-month and 9-month risk-free continuously compounded interest rate are 3% and 4% per annum, respectively. Suppose the forward price is $910. Is there an arbitrage opportunity? If so, how do you take advantage of the arbitrage opportunity?