Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You anticipate the receipt of money in 190 days, which you will use to purchase stocks in a particular company. The stock is currently selling

You anticipate the receipt of money in 190 days, which you will use to purchase stocks in a particular company. The stock is currently selling for $75 and will pay a $.50 Dividend in 50 days and another in 140 days . The risk free rate is 3% and with continuous compounding for all maturities and you go long on the contract

A)At what price would you be willing to buy the stock in 190 days through a forward contract

B) suppose you agree at the price you found in the previous part, and 80 days later the stock has fallen to $68.31. What is the value of the forward contract?

C)What is the new forward price?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Public Finance

Authors: Harvey S. Rosen

5th Edition

025617329X, 978-0256173291

More Books

Students also viewed these Finance questions

Question

=+ e. In what sense are infl ation scares self-fulfi lling?

Answered: 1 week ago