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Actuarial FM question: Please show steps. Final answer is a) 73.5115 , 78.8417 , -0.0752 b) 82.0764 , 88.0277, 0.035 A stock is currently priced
Actuarial FM question:
Please show steps. Final answer is a) 73.5115 , 78.8417 , -0.0752 b) 82.0764 , 88.0277, 0.035
A stock is currently priced at S0 = 85. The continuously compounded risk free rate of interest is 7%. Find the prepaid forward price, the forward price and the annualized forward premium for a one-year forward contract on one share of stock if: (a) The stock pays a dividend of 3 quarterly and the stock is delivered after the last dividend at the end of the year is paid. (b) The stock pays continuous dividends at a rate of 3.5%.
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