Suppose XYZ stock pays no dividends and has a current price of $50. The forward price for
Question:
a. Graph the payoff and profit diagrams for a forward contract on XYZ stock with a forward price of $55.
b. Is there any advantage to investing in the stock or the forward contract? Why?
c. Suppose XYZ paid a dividend of $2 per year and everything else stayed the same. Now is there any advantage to investing in the stock or the forward contract? Why? Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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a It does not cost anything to enter into a forward contractwe do not pay a premium Therefore the pa...View the full answer
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