Assume the forward price = $51. If we sell the forward contract and the asset price...

Question

Question

Assume the forward price = $51. If we sell the forward contract and the asset price at expiration is $60, we have a payoff of

Answer 1

Answer #1

Payoff = forward price-asset price = 51-60 = -9

Answer 2

Similar Homework Help Questions

You enter into a 6-month long forward contract on XYZ stock. The forward price is 50....

You enter into a 6-month long forward contract on XYZ stock. The forward price is 50. What is the payoff to your long forward if XYZ stock rises to 53 at 6 months? You enter into a 6-month short forward contract on XYZ stock. The forward price is 50. What is the payoff to your short forward if XYZ stock rises to 51 at 6 months? You purchase a European call option on XYZ stock with strike price 50. What...
A forward contract is sold at t = 0 with a forward price F0 = $135. ...

A forward contract is sold at t = 0 with a forward price F0 = $135. Suppose the spot price (S0)at t = 0 is $115, and the expiration day spot price is ST = $125. What is the value of the contract to the buyer of this forward at expiration? -$5.00 -$10.00 $10.00 $5.00 $20.00
10. What should a trader do when the one-year forward price of an asset is too low? Assume that the asset provides...

10. What should a trader do when the one-year forward price of an asset is too low? Assume that the asset provides no income. A. The trader should borrow the price of the asset, buy one unit of the asset and enter into a short forward contract to sell the asset in one year. B. The trader should borrow the price of the asset, buy one unit of the asset and enter into a long forward contract to buy the...

A forward contract is sold at t = 0 with a forward price F0 = $200....

A forward contract is sold at t = 0 with a forward price F0 = $200. Suppose the spot price (S0) at t = 0 is $175, and the settlement (expiration) day spot price is ST = $185. What is the value of the contract at settlement to the seller of this forward? $25 $15 $0 −$15 −$25
Consider an asset with a price of R190. A new forward contract on the asset expires...

Consider an asset with a price of R190. A new forward contract on the asset expires in six months with a risk-free rate of 5.4% (discreet compounding). Three months after you entered into the contract, the price increased to R205 while the riskfree interest rate remained the same. Calculate the credit risk if you have a long position and indicate whether you or the counter party bears this risk.
A three-year long forward contract is entered into when the spot price of an investment asset...

A three-year long forward contract is entered into when the spot price of an investment asset is $30 and the risk free rate for all maturities. (With continuous compounding is 10%. the asset provides an income of $2 at the end of the first year and $2 at the end of the second. a) what is the 3 year forward price? b) what is the initial value of the forward contract? c) Two and a half years later, the spot...

8 What should a trader do when the one-year forward price of an investment asset is...

8 What should a trader do when the one-year forward price of an investment asset is too low? Assume that the asset provides no income A. The trader should borrow the price of the asset, buy one unit of the asset and enter into a short forward contract to sell the asset in one year B. The trader should borrow the price of the asset, buy one unit of the asset and enter into a long forward contract to buy...
a Forward contract i. When do we create the forward contract to buy foreign currency? ii....

a Forward contract i. When do we create the forward contract to buy foreign currency? ii. When do we create the forward contract to sell foreign currency? b. Futures contract i. When do we create the futures contract to buy foreign currency? ii. When do we create the futures contract to sell foreign currency?
1. Solve for the price of a forward contract on a generic asset that expires on...

1. Solve for the price of a forward contract on a generic asset that expires on September 10 whose spot price as of June 10 is $45, assuming that the annually compounded risk-free rate is 6.01 percent.

Assume that you own a dividend-paying stock currently worth $150. You plan to sell the stock in 2...

Assume that you own a dividend-paying stock currently worth $150. You plan to sell the stock in 250 days. In order to hedge against a possible price decline, you wish to take a short position in a forward contract that expires in 250 days. The risk-free rate is 5.25% per annum (discretely compounding). Over the next 250 days, the stock will pay dividends according to the following schedule: Days to Next Dividend Dividends per Share ($) 30 1.25 120 1.25...