how to solve this? thanks.
You have just initiated a forward contract to buy 1 million shares of a stock that that does not pay a dividend. The current stock price is $80 and the forward price on this 90 day contract is $83. The annual risk-free rate is 7%. The annual required return on the asset is 15% a What is the value of this contract today at initiation)? b. Which of the following is true today (at initiation)? Explain your answer. The expected spot price in 90 days for stock is less than $80, 1. The expected spot price in 90 days for stock is between $80 and $83. wl. The expected spot price in 90 days for stock is greater than $83. Now assume that 30 days have passed since the initiation of this contract (there are 60 days left to contract expiry) and the spot price is now $87 and the forward price on identical contracts is now $89. The annual risk-free rate is still 7% and the annual required return on the asset is still 15% c. Now what is the value of this contract (today, 30 days after initiation)? d. Which of the following is true today, 30 days after initiation)? Explain your answer. 1. The expected spot price in 60 days for stock is less than $87. H. The expected spot price in 60 days for stock is between $87 and $89. l. The expected spot price in 60 days for stock is greater than $89. Now assume that 90 days have passed since the initiation of this contract (the contract is at expiration) and the spot price is now $93. The annual risk-free rate is still 7% and the annual required return on the asset is still 15%. e. Now what is the value of this contract (today, at expiry)? You have just initiated a forward contract to buy 1 million shares of a stock that that does not pay a dividend. The current stock price is $80 and the forward price on this 90 day contract is $83. The annual risk-free rate is 7%. The annual required return on the asset is 15% a What is the value of this contract today at initiation)? b. Which of the following is true today (at initiation)? Explain your answer. The expected spot price in 90 days for stock is less than $80, 1. The expected spot price in 90 days for stock is between $80 and $83. wl. The expected spot price in 90 days for stock is greater than $83. Now assume that 30 days have passed since the initiation of this contract (there are 60 days left to contract expiry) and the spot price is now $87 and the forward price on identical contracts is now $89. The annual risk-free rate is still 7% and the annual required return on the asset is still 15% c. Now what is the value of this contract (today, 30 days after initiation)? d. Which of the following is true today, 30 days after initiation)? Explain your answer. 1. The expected spot price in 60 days for stock is less than $87. H. The expected spot price in 60 days for stock is between $87 and $89. l. The expected spot price in 60 days for stock is greater than $89. Now assume that 90 days have passed since the initiation of this contract (the contract is at expiration) and the spot price is now $93. The annual risk-free rate is still 7% and the annual required return on the asset is still 15%. e. Now what is the value of this contract (today, at expiry)
