A stock trading at ($ 100) per share can be financed at the continuously compounded interest rate

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A stock trading at $\$ 100$ per share can be financed at the continuously compounded interest rate of $5 \%$ per annum.

(a) What is the 1-year forward price of the stock if it pays quarterly dividend of $\$ 1$ per quarter?

(b) What is the 1-year forward price if its dividend yield is $4 \%$ per annum?

(c) If the dividend yield is $4 \%$ per annum, is the forward curve in backwardation or contango?

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Mathematical Techniques In Finance An Introduction Wiley Finance

ISBN: 9781119838401

1st Edition

Authors: Amir Sadr

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Question Posted: Feb 27, 2024 03:11 AM

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A stock trading at ($ 100) per share can be financed at the continuously compounded interest rate

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Stock Forward Price with Dividends a Forward Price with Quarterly Dividend We can use the following formula to calculate the forward price of the stoc...View the full answer

Mathematical Techniques In Finance An Introduction Wiley Finance

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