Question
2. A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $40 and the risk-free rate of interest
2. A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $40 and the risk-free rate of interest is 10% per annum with continuous compounding.
- What are the forward price and the initial value of the forward contract?
- Six months later, the price of the stock is $45 and the risk-free interest rate is still 10%. What are the forward price and the value of the forward contract?
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Introduction To Finance Financial Management And Investment Management
Authors: Pamela P. Drake, Frank J. Fabozzi, Francesco A. Fabozzi
1st Edition
9811239657, 978-9811239656
