Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. on june 15, you took a long forward contract (deli

On June 15, you took a long forward contract (delivery on December 15) on a dividend-paying...

50.1K

Verified Solution

Question

Finance

On June 15, you took a long forward contract (delivery onDecember 15) on a dividend-paying stock when the stock price was$30 and the risk-free interest rate (with discrete compounding) is12% per annum. The amount of the dividends were known as $0.75 onAug 15, and Nov 15. It is now September 15 and the current stockprice and the risk-free interest rate are, respectively, $31 and10%. What is the value of your long forward position now? Assumethe forward contract prices are arbitrage free prices.

Answer & Explanation Solved by verified expert
3.6 Ratings (361 Votes)
Step 1 Calculating Forward Price on June 1 On June 15 Spot price S0 30 Risk free rate r 12 pa Dividend on Aug 15 D1 075 time to first dividend t1 212 and dividend on Nov 15    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Two objects of masses m and 8m are moving toward each other along the x-axis with...

Physics
Q

Question 1 Points 1 What is the solubility of sugar at 20 C in 500...

Biology
Q

4 Relieving pain falls under which ground for euthanasia A mercy B autonomy C justice

Biology
Q

d 0 8 e 0 4 A solid sphere of volume V experiences a viscous...

Physics
Q

Figure shows a thin rod mass M length L suspended in a vertical plane by...

Physics
Q

When graphing r 9cos 40 the cos 40 0 on the interval

Geometry
Q

1 Write the equation of the line that is perpendicular to y 5x and passes...

Calculus
Q

Two urns contain white balls balls and the second urn conta each urn What is...

Algebra
Q

Indicate whether the following statement is true or false. For any false statement, indicate why...

Accounting
Q

In January 2018, Vega Corporation purchased a patent at a cost of $220,000. Legal and...

Accounting
Q

The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and...

Accounting
Q

Auditing Question 28 (4 points) Listen You are reviewing a...

Accounting