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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...
- 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....
1. A 1 year long forward contract an a non-dividend paying stock is entered into when...
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?
A short forward contract that was negotiated some time ago will expire in six months and...
A short forward contract that was negotiated some time ago will expire in six months and has a delivery price of $150 (agreed upon price at inception). Today’s forward price for a six-month forward contract on the same underlying is $173. The six month risk-free interest rate (with continuous compounding) is 5% per year. What is today’s value of the short 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...
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?
A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price...
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?
Consider a six-month forward contract on a non-dividend paying stock. Assume the current stock price is...
Consider a six-month forward contract on a non-dividend paying stock. Assume the current stock price is $50 and the risk-free interest rate is 7.84% per annum with continuous compounding. Suppose the price of this six-month forward price is $53.50. Show that it creates an arbitrage opportunity? Write down the complete strategy for an arbitrageur --- you must list down all the actions that are required now and later and demonstrate how arbitrageur earns a risk-less profit.
Several months ago, XYZ entered into a long forward contract on an asset with no income....
Several months ago, XYZ entered into a long forward contract on an asset with no income. XYZ agreed to pay $30 to seller at maturity. Today, the contract matures in 9 months. The risk-free rate with continuous compounding is 8.5% per annum, the underlying asset price is $38.55. Calculate the value of the above forward contract. 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.
On June 15, you took a long forward contract (delivery on December 15) on a dividend-paying...
On June 15, you took a long forward contract (delivery on December 15) on a dividend-paying stock when the stock price was $30 and the risk-free interest rate (with discrete compounding) is 12% per annum. The amount of the dividends were known as $0.75 on Aug 15, and Nov 15. It is now September 15 and the current stock price and the risk-free interest rate are, respectively, $31 and 10%. What is the value of your long forward position now?...
5. A short forward contract that was negotiated some time ago will expire in three months...
5. A short forward contract that was negotiated some time ago will expire in three months and has a delivery price (K) of $42. The current forward price (Fo) for three-month forward contract is $40. If Kis larger than Fo, there is a gain for the short forward contract. The three month risk-free interest rate (with continuous compounding) is 8%. What is the value of the short forward contract? A. $40.50 B. $400.00 C. $7.78 D. $1.96 E. $35.84
Consider a long forward contract to purchase a non-dividend-paying stock in 3 months. Assume the current...
Consider a long forward contract to purchase a non-dividend-paying stock in 3 months. Assume the current stock price is $40 and the risk-free interest rate is an APR of 5% compounded quarterly. If the market forward price is $43, show explicitly the arbitrage opportunity. note: this is not continuous compounding but discrete! so please do not use the Se^(rT) ( exponential formula)
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?
5. A short forward contract that was negotiated some time ago will expire in three months and has a delivery price (K) of $42. The current forward price (Fo) for three-month forward contract is $40. If Kis larger than Fo, there is a gain for the short forward contract. The three month risk-free interest rate (with continuous compounding) is 8%. What is the value of the short forward contract? A. $40.50 B. $400.00 C. $7.78 D. $1.96 E. $35.84
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