Question
The date is 14 August and the NWORC Ltd is trading at $55.40, the current continuous risk-free interest rate is 4.50%p.a. You have been approached
The date is 14 August and the NWORC Ltd is trading at $55.40, the current continuous risk-free interest rate is 4.50%p.a. You have been approached to provide a fair price for an individual share futures contract that expires on 15 December.
a. There are 124 days between 14 August and 15 December, what is the fair price of the futures assuming no dividends?
b.What is the fair price of the futures contract if the dividend yield is 2.5% per annum?
c.What do your answers to parts I and II tell you about the impact of carrying costs on future prices?
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Multinational Finance Evaluating The Opportunities Costs And Risks Of Multinational Operations
Authors: Kirt C. Butler
6th Edition
111921968X, 978-1119219682
