Question
1. XYZ Corp.'s stock is currently trading at $50 per share. The company's dividend yield is 2.5% and the risk-free reate is 4%. a) What
1. XYZ Corp.'s stock is currently trading at $50 per share. The company's dividend yield is 2.5% and the risk-free reate is 4%.
a) What is the arbitrage-free price of a six-month forward contract using the continuously compounded quity forward pricing model?
b) After two months, XYZ stock is trading at $30 per share. What is the gain or loss on the forward contract for long position in the contract (the buyer)?
c) At contract expiration, XYZ stock is trading at $55 per share. What is the net settlement payment made by (to) the long position in the contract?
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Financial Accounting Tools For Business Decision Making
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
1st Edition
0471169196, 978-0471169192
