Finance 454 - Forwards and Futures Multiple Choice Question
QUESTION 11 5 points Save Answer A $50 stock pays a $1 dividend every 3 months, with the first dividend coming 3 months from today. The annual continuously compounded risk-free rate is 6%. What is the price of a prepaid forward contract that expires 1 year from today, immediately after the fourth-quarter dividend? O S46.1467 O $47.1467 O $48.1467 O $49.1467 O $50 QUESTION 12 5 points Save Answer Suppose you are market-maker in S&R index forward contracts. The S&R index spot price is 1100, the annual risk-free rate is 4.5%, and the dividend yield on the index is 1.5%. What is the no-arbitrage forward price for delivery in 9 months? (That is, if the theoretical forward pricing model holds, what is the forward price?) O $1,129.26 O S1,133.50 O $1,125.03 O $1,100.00 O $1,120.00 QUESTION 13 5 points Save Answer The S&R index spot price is 1100, the annual risk-free rate is 5%, and the annual continuous dividend yield on the index is 2%. Suppose you observe a 6-month forward price of 1120. If a proper profitable "arbitrage" strategy is undertaken, what is the arbitrage strategy? O Cash and carry strategy Reverse cash and carry strategy Buy and hold strategy Shorting synthetic forward strategy O Longing forward contract strategy QUESTION 14 5 points Save Answer A $50 stock pays an annual 8% continuous dividend. The annual continuously compounded risk-free rate is 6%. What is the price of a forward contract that expires 1 year from today? O $49.0099 O $49.9901 O $50.9703 O 51.9505 O $50 QUESTION 15 5 points Save Answer The S&R index spot price is 1100, the annual risk-free rate is 5%, and the annual continuous dividend yield on the index is 2%. Suppose you observe a 6-month forward price of 1120. If a proper profitable "arbitrage" strategy is undertaken, what is the arbitrage profit? O $3.38 O $0.58 OS6.16 OSO O $2.00 QUESTION 11 5 points Save Answer A $50 stock pays a $1 dividend every 3 months, with the first dividend coming 3 months from today. The annual continuously compounded risk-free rate is 6%. What is the price of a prepaid forward contract that expires 1 year from today, immediately after the fourth-quarter dividend? O S46.1467 O $47.1467 O $48.1467 O $49.1467 O $50 QUESTION 12 5 points Save Answer Suppose you are market-maker in S&R index forward contracts. The S&R index spot price is 1100, the annual risk-free rate is 4.5%, and the dividend yield on the index is 1.5%. What is the no-arbitrage forward price for delivery in 9 months? (That is, if the theoretical forward pricing model holds, what is the forward price?) O $1,129.26 O S1,133.50 O $1,125.03 O $1,100.00 O $1,120.00 QUESTION 13 5 points Save Answer The S&R index spot price is 1100, the annual risk-free rate is 5%, and the annual continuous dividend yield on the index is 2%. Suppose you observe a 6-month forward price of 1120. If a proper profitable "arbitrage" strategy is undertaken, what is the arbitrage strategy? O Cash and carry strategy Reverse cash and carry strategy Buy and hold strategy Shorting synthetic forward strategy O Longing forward contract strategy QUESTION 14 5 points Save Answer A $50 stock pays an annual 8% continuous dividend. The annual continuously compounded risk-free rate is 6%. What is the price of a forward contract that expires 1 year from today? O $49.0099 O $49.9901 O $50.9703 O 51.9505 O $50 QUESTION 15 5 points Save Answer The S&R index spot price is 1100, the annual risk-free rate is 5%, and the annual continuous dividend yield on the index is 2%. Suppose you observe a 6-month forward price of 1120. If a proper profitable "arbitrage" strategy is undertaken, what is the arbitrage profit? O $3.38 O $0.58 OS6.16 OSO O $2.00
