A one-year forward contract of a share, which pays no dividend before the contract matures is written when the share has a price of $50 and the risk-free interest rate is 10% a year.
A. What is the forward price?
B. If the share is worth $55 six months later, what is the value of the original forward contract at this time? If another forward contract is to be written with the same date of maturity, what should the forward price be?
A one-year forward contract of a share, which pays no dividend before the contract matures is...
1. A 1 year long forward contract an a non-dividend paying stock is entered into when the stock price is $39 and the risk-free rate of interest is 6.5% per annum with continuous compounding (a) What is the forward price? (b) Six months later; the price of the stock is $42.50 and the risk-free interest rate is still 6.5%. What is the forward price?
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?...
- On 8/15/2019, a 3-year forward contract, expiring 8/15/2022, on a non-dividend-paying stock was entered into when the stock price was $55 and the risk-free interest rate was 10.8% per annum with continuous compounding. 1 year later, on 8/15/2020, the stock price becomes $58. What is the "delivery" price of the forward contract entered into on 8/15/2019? Round your answer to the nearest 2 decimal points. For example, if your answer is $12.345, then enter "12.35" in the answer box....
A one-year long forward contract on a gas portfolio is entered into when the gas portfolio price is $3 and the risk-free rate of interest is 3% per annum with continuous compounding. What are the forward price and the initial value of the forward contract? Six months later, the price of the gas portfolio is $2.6 and the risk-free interest rate is still 3%. What are the forward price and the value of the forward contract?
A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $56 and the risk-free rate (with continuous compounding) is 8%.` (1) What are the forward price and the initial value of the forward contract? (2) Five months later, the price of the stock is $60 and the risk-free rate is still 8%. What are the forward price and the value of the forward contract?
Suppose you bought a forward contract on January 1 that matures six months later. The forward price was $220 at the time of purchase, and the continuously compounded interest rate was 8% per year. Three months have passed, and the spot price is now $150. What is the value of your forward contract today?
You decide to enter a one-year forward contract on a stock S with S(0) = $100 that pays $5 cash dividends in four and eight months. The continuous interest rate is r = 2%. (a) (3pts) What is the forward price F (0, 1) of this contract? Six months later, the price of the stock increased to $110. You decide to enter a second forward with the same maturity, i.e. a six-month forward contract. (b) (3pts) What is the forward...
A stock is expected to pay a dividend of $1.50 per share in three months and in six months. The stock price is currently $45and the risk-free rate is 6% per annum with continuous compounding for all maturities. An investor has just taken a short position in seven-month forward contract on the stock. #1) What is the forward price for no arbitrage opportunity? #2) What is the initial value of the forward contract? 4 months later. Now, the price of the...
Problem 2. Forward prices and value [25 marks] a) [5] Suppose there is a 16 months Forward on 1 share of non- dividend paying stock traded in the market. Current stock prices are $50 and the Forward price is $57. What is the interest rate (continuously compounded) implied by the given Forward price? b) [6] Suppose that actual interest rates are 7% per annum (continuously compounded as well). Find the Fair price of Forward contract and explain your arbitrage strategy....
On 8/15/2019, a 3-year forward contract, expiring 8/15/2022, on a non-dividend-paying stock was entered into when the stock price was $50 and the risk-free interest rate was 10.5% per annum with continuous compounding. 1 year later, on 8/15/2020, the stock price becomes $57. What is the "delivery" price of the forward contract entered into on 8/15/2019?