Question
Hi, Just want to double check answers for my homework assignment. Questions are as follow, any associated work/math would be appreciated! 1) A $60 stock
Hi, Just want to double check answers for my homework assignment. Questions are as follow, any associated work/math would be appreciated!
1) A $60 stock pays a $1.50 dividend quarterly. The stock just paid a dividend yesterday, so the first dividend comes exactly 3 months from today. Additional dividends are paid every three months thereafter. The risk free rate is 4%. What is the theoretical forward price for delivery of the stock in 1 year (to two digits accuracy)?
2) Presume that you went long the forward contract outlined in question 1. Suppose that at the end of six months, the stock price is $65 and the riskfree rate is still 4%. What is the value of the long forward contract (again, to two digits)?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started