Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Suppose that on April 1 you entered into a short position in a forward contract that matures one year later. The underlying asset of the
Suppose that on April 1 you entered into a short position in a forward contract that matures one year later. The underlying asset of the forward contract is a stock that is expected to pay out a dividend of 5 kr on June 1. When you entered the forward contract, the forward price was 100 kr, and the continuously compounded interest rate was 12% per annum for all maturities. Six months have now passed and the spot price is now 79 kr (interest rates are the same). What is the value of your forward contract today?
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