LR2020-10 Problem FORW-40H It is given that SO) = $10. This is the price per share of a given stock. 8 = 4% p.a. This is the dividend rate (continuously-compounded, using a 365 day year). This is the growth rate of the number of shares under reinvestment of dividends. F(0,T) = $10.30. This is the forward price for delivery of 1 share 200 days from now (time T). Show how synthetic lending over 200 days can be obtained. You need to hold shares (long or short) and one forward contract, long or short. Time-O value (cash outflow) Time-T value Total (b) What is the implied annual interest rate, expressed as a continuously-compounded rate (using a 365 day year)? (c) Show how synthetic lending over 200 days can be obtained. You need to start with a (long or short) position in 1 share of stock plus a (long or short) position in forward contracts. Time-0 value ($) (cash outflow) Time-T value ($) Total LR2020-10 Problem FORW-40H It is given that SO) = $10. This is the price per share of a given stock. 8 = 4% p.a. This is the dividend rate (continuously-compounded, using a 365 day year). This is the growth rate of the number of shares under reinvestment of dividends. F(0,T) = $10.30. This is the forward price for delivery of 1 share 200 days from now (time T). Show how synthetic lending over 200 days can be obtained. You need to hold shares (long or short) and one forward contract, long or short. Time-O value (cash outflow) Time-T value Total (b) What is the implied annual interest rate, expressed as a continuously-compounded rate (using a 365 day year)? (c) Show how synthetic lending over 200 days can be obtained. You need to start with a (long or short) position in 1 share of stock plus a (long or short) position in forward contracts. Time-0 value ($) (cash outflow) Time-T value ($) Total