A one-year long forward contract on a non-dividend - paying stock is entered into when the stock price is $65 and the risk - free rate of interest is 8% per annum with continuous compounding. Four months later, the price of the stock is $61 and the risk - free interest rate is still 8%. What is the value of the ongoing forward contract?

A one-year long forward contract on a non-dividend - paying stock is entered into when the stock price is $65 and the risk - free rate of interest is 8% per annum with continuous compounding. Four months later, the price of the stock is $61 and the risk - free interest rate is still 8%. What is the value of the ongoing forward contract?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter16: The Markets For Labor, Capital, And Land

Section: Chapter Questions

Problem 12P

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