Question
An institutional investor expects the receipt of funds in 200 days, which the investor will use to buy a specific share. The share the investor
An institutional investor expects the receipt of funds in 200 days, which the investor will use to buy a specific share. The share the investor wishes to purchase is currently selling for $180.00 and will pay dividends. The risk-free rate is 3%. The initial price of the forward contract is $172.89 and the investor takes a long position on the share by entering into this contract. Suppose it is 50 days after the investor entered into the forward contract and the share price increased to $200. Assume the present value of the remaining dividends is $9.93 at this time.
At this point, the value of the contract is $ .
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