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3. Consider a stock whose price on January 1, 2014 is $100 and which will pay two dividends: S3 o...
1. The stock of RUSH Music Enterprises (RUSH) has a current spot price of 100. RUSH...
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...
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. T...
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?...
Suppose that the price of stock on 1 April 2000 turns out to be 10% lower...
Suppose that the price of stock on 1 April 2000 turns out to be 10% lower than it was on 1 January 2000. Assuming that the risk-free rate is constant at r = 5%; what is the percentage drop of the forward price on 1 April 2000 as compared to that on 1 January 2000 for a forward contract with delivery on 1 October 2000?
Please use EXCEL to do it, Thanks! Consider XYZ stock currently worth $95. On Jan 15th,...
Please use EXCEL to do it, Thanks!
Consider XYZ stock currently worth $95. On Jan 15th, 2019, you plan to sell it 9 months later on Oct 15h, 2019 to raise money, but are concerned that the price may have fallen significantly by then. To hedge this risk, you enter into a forward contract to the stock which will mature on Oct 151h, 2019. Assume that the risk free interest rate will remain at 3.0% pa. in 2019. Use continuous...
Problom 2.5.4. (Price of continuous random dividends) The current price of a stock is 100. The...
Problom 2.5.4. (Price of continuous random dividends) The current price of a stock is 100. The stock pays dividends continuously at a rate proportional to its price. The dividend yields is 396. The continuously compounded risk-free interest rate is 7%. Calculate the price of the stream of dividends to be paid in the next 5 years. (Note: Because the dividends are stochastic, their present value is also stochastic and hence cannot be their price.)
2. Arbitrage on the tree A stock that pays no dividends has price today of 100. In one year's tim...
2. Arbitrage on the tree A stock that pays no dividends has price today of 100. In one year's time the stock is worth 110 with probability 0.75, and 85 with probability 0.25. The one-year annually compounded interest rate is 5%. a) Calculate the forward price of the stock for a forward contract with maturity one year. (b) Calculate the price of a one-year European put option with strike 100. (c) Suppose you observe that the put option in part...
- On 8/15/2019, a 3-year forward contract, expiring 8/15/2022, on a non-dividend-paying stock was entered into...
- 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....
3. A stock is expected to pay a dividend of $1.25 per share in 3 months...
3. A stock is expected to pay a dividend of $1.25 per share in 3 months and also in 6 months. The stock price is $46 and the risk-free rate of interest is 6.5 % per annum with continuous compounding on all maturities. An investor has taken a short position in a six-month forward contract on the stock. What is the forward price?
Consider a stock with a price with S = 100 and pays no dividends. The annual...
Consider a stock with a price with S = 100 and pays no dividends. The annual risk-free is 10%. A European put option on the stock with a strike price 90 and an expiration date three months from now has a price of 10. What is the price of a European call option on this stock with the same strike price and expiration date?
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...
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...
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?...
Please use EXCEL to do it, Thanks!
Consider XYZ stock currently worth $95. On Jan 15th, 2019, you plan to sell it 9 months later on Oct 15h, 2019 to raise money, but are concerned that the price may have fallen significantly by then. To hedge this risk, you enter into a forward contract to the stock which will mature on Oct 151h, 2019. Assume that the risk free interest rate will remain at 3.0% pa. in 2019. Use continuous...
Problom 2.5.4. (Price of continuous random dividends) The current price of a stock is 100. The stock pays dividends continuously at a rate proportional to its price. The dividend yields is 396. The continuously compounded risk-free interest rate is 7%. Calculate the price of the stream of dividends to be paid in the next 5 years. (Note: Because the dividends are stochastic, their present value is also stochastic and hence cannot be their price.)
2. Arbitrage on the tree A stock that pays no dividends has price today of 100. In one year's time the stock is worth 110 with probability 0.75, and 85 with probability 0.25. The one-year annually compounded interest rate is 5%. a) Calculate the forward price of the stock for a forward contract with maturity one year. (b) Calculate the price of a one-year European put option with strike 100. (c) Suppose you observe that the put option in part...
3. A stock is expected to pay a dividend of $1.25 per share in 3 months and also in 6 months. The stock price is $46 and the risk-free rate of interest is 6.5 % per annum with continuous compounding on all maturities. An investor has taken a short position in a six-month forward contract on the stock. What is the forward price?
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