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- A forward contract with 8 months to maturity is written on an underlying share. The market price of the share is $34, and it is expected to pay dividends of $1.40 after 2 months and $2 immediately prior to maturity of the forward. The relevant riskless rate of interest is 4%. Calculate the theoretical forward price and initial value of the forward contract and explain the forward pricing relationship.There is a futures contract available on a dividend paying stock. The current stock price is $7.25 and a dividend of $2 will be paid after 6 months. The interest rate is 12% per annum (assuming discrete compounding). The fair price of the futures for delivery one year ahead is closest to which of the values below? Question 8Answer a. $5.90 b. $8.12 c. $5.50 d. $10.40Consider a long forward contract on Amps Inc stock with a remaining maturity of 8 months. Amps Inc has announced that it will pay $2 dividend per share after 3 months. The risk-free rate of interest (with continuous compounding) is 5 percent per year, the current stock price is $40, and the delivery price when the contract is in place is $42. What is the current no-arbitrage forward price of this stock? 35.32 42.67 39.31 42.44 33.89 32.45
- Consider a 4-month forward contract for which the underlying asset is a stock index with value of 3, 825.97 and a continuous dividend yield of 0.5% Assume the continuous risk-free annual interest rate is 4.5%, a. Determine the no arbitrage forward price. $ Round your answer to the nearest cent b. Calculate the value of a long position if 2 month(s) later the index changes to 3, 825.97 and the risk-free rate is still 4.5% $ Round your answer to the nearest centYou enter into a 9-month forward contract on a non-dividend paying stock when the stock price is £38 and the risk-free interest rate is 10% per annum (assume discrete compounding). Which of the below is closest to the no-arbitrage forward price? a. $40 b. $39 c. $41 d. $38suppose that you enter into a six-month forward contract on a non-dividend paying stock when the stock price is $30 and the risk-free interest rate(with continuous compounding) is 12% per annum. what is the forward price? a) $30.89 b) $31.86 c) $34.56 d) $32.15
- Assume an investor bought a one-year forward contract with price F0(T) = 110. Six months later, at Time t = 0.5, the price of the stock is S0.5 = 115 and the interest rate is 4%. The value of the existing forward contract expiring in six months will be closest to: * 5. 7. -7.2. A one year long forward contract on a non-dividend-paying stock is entered into when the stock price is $45 and the risk free rate of interest is 10% per annum with continuous compounding a) What are the forward price and initial value of the forward contract? b) Six month later, the price of the stock is $50 and risk-free interest rate is still 10%. What are the forward price and the value of the forward contract?1. If the contract at inception is $20 for a future expiring in 1 year and the current contract is 22 what is the inplied future value with rf rate of 5%? answers: A) 1.95 B) 2 C) 1.87 D) none of above 2. you have an option that pays 1 if the stock price = or above 10 and 0. If the cureent stock price is 7 and movements are to 14 and 3.5 what is the value of this option assuming expiry in 1 year and interest rate of 5% answers: A) .349 B) .356 C) .362 D) none of the above
- A 1-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $ 22.1 and the risk-free rate of interest is 1.9% per annum with continuous compounding. 2 months later, the price of the stock is $ 27 and the risk-free interest rate is now 1.8%. What is the forward price at this point in time? (Report your answer in dollars and cents.) Answer: 13A stock is expected to pay a dividend of $1 per share in 2 months and in 5 months. The stock price is $60, and the risk-free rate of interest is 5% per annum with continuous compounding for all maturities. An investor has just taken a short position in a 6-month 1. What are the forward price and the initial value of the forward contract? [Hint: what's the value of a forward contract at the initiation of the contract? 2.Three months later, the price of the stock is $52 and the risk-free rate of interest is still 8% per annum. What is the forward price of a new forward contract with the same expiration date as above? What is the value of the short position in the oldSuppose XYZ stock pays no dividends and has a current price of $50. The forward price for delivery in 1 year is $55. Suppose the 1-year eective annual interest rate is 10%. (a) Graph the payo and prot diagrams for a forward contract on XYZ stock with a forward price of $55. (b) Is there any advantage to investing in the stock or the forward contract? Why? (c) Suppose XYZ paid a dividend of $2 per year and everything else stayed the same. Now is there any advantage to investing in the stock or the forward contract? Why?