Question
Boring Unreliable Gadget Inc.'s (BUG) stock price S is $50 today. The stock is expected to pay dividends of $2 after 1 months and $2.75
Boring Unreliable Gadget Inc.'s (BUG) stock price S is $50 today. The stock is expected to pay dividends of $2 after 1 months and $2.75 after 4 months.
a. If the continuously compounded interest rate is 4% pa, what is the price of a six-month forward contract on BUG?
b. Five months later, the price of the stock is $65. The interest rate remains the same as in Part (a).
What is the forward price and value of the forward contract?
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The Value Of Uncertainty Dealing With Risk In The Equity Derivatives Market
Authors: George Kaye
1st Edition
1848167725,1908979585
