Suppose that the current price of a stock is 75. The expected value of the stock price in three years is 90 per share. T...
Suppose that the current price of a stock is 75. The expected value of the stock price in three years is 90 per share. The stock pays no dividends. Supposed further that you know the following: the risk-free interest rate is positive, there are no transaction costs and investors require compensation for risk. The price of a three-year forward on a share of this stock is X, and at this price an investor is willing to enter into the forward. Determine what can be concluded about X. Show all the steps of your reasoning.
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Suppose that the current price of a stock is 75. The expected value of the stock price in three years is 90 per share. T...
A stock is expected to pay a dividend of $1.50 per share in three months and...
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...
Consider a stock expected to pay a dividend $5 per share in three months. The current...
Consider a stock expected to pay a dividend $5 per share in three months. The current stock price is $100, and the annualized interest rate is 10% . An investor tries to take a long position in a one-year forward contract on the stock. What is the forward price?
The price of a stock is $75 per share. The stock is not expected to pay...
The price of a stock is $75 per share. The stock is not expected to pay any cash dividends over the next year. The returns on the stock have a normal probability distribution with expected value of 15% and a standard deviation of 40%. (a) What is the probability that the price of the stock will be $25 or less one year from now? (b) What is the probability that the price of the stock will be between $75 and...
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?
AXE stock is currently trading at $50 per share. Its price is expected to go up...
AXE stock is currently trading at $50 per share. Its price is expected to go up to $65 or down to $45 in one year. A one year forward contract on AXE stock is offered at $55. The risk free interest rate is 4% is there any arbitrage profit making opportunity to profit from the situation without taking any risk and without using out of pocket funds based on the information? If so, 1. Show the steps to take an...
NNT Ltd pays no dividends and has a current stock price of $20 per share. Its...
NNT Ltd pays no dividends and has a current stock price of $20 per share. Its returns have an annual volatility of 15% and the risk free interest rate is 4% per annum. (i). Calculate the value of a one-year at-the-money call option using the Black Scholes model.
A stock is expected to pay the following dividends per share over the next three years,...
A stock is expected to pay the following dividends per share over the next three years, respectively: $1.50, $1.95 and $2.20. If you expect to be able to sell the stock for $54.26 in three years and your required rate of return is 8%, what is the most that you should be willing to pay for a share of this stock today? no excel handwork only
Roslin Robotics stock has a volatility of 30% and a current stock price of $69 per...
Roslin Robotics stock has a volatility of 30% and a current stock price of $69 per share. Roslin pays no dividends. The risk-free interest is 6%. Determine the Black-Scholes value of a one-year, at-the-money call option on Roslin stock.
Roslin Robotics stock has a volatility of 26% and a current stock price of $56 per...
Roslin Robotics stock has a volatility of 26% and a current stock price of $56 per share. Roslin pays no dividends. The risk-free interest is 6%. Determine the Black-Scholes value of a one-year, at-the-money call option on Roslin stock.
Suppose the stock in question 2 pays a dividend of $0.225/share per quarter. You expect the...
Suppose the stock in question 2 pays a dividend of $0.225/share per quarter. You expect the dividend to be paid 3, 6, 9, and 12 months into the life of the forward. The appropriate risk-free rate for all maturities up to 1-year is 2.02%, compounded annually. What is the price of the forward?
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?
Roslin Robotics stock has a volatility of 30% and a current stock price of $69 per share. Roslin pays no dividends. The risk-free interest is 6%. Determine the Black-Scholes value of a one-year, at-the-money call option on Roslin stock.
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