Suppose you buy a one year forward contract at $65. At expiration, the spot price is $73

Question:

Suppose you buy a one year forward contract at $65. At expiration, the spot price is $73 and the risk free rate is 10%. What is the value of the contract at expiration?
A) 8.00
B) - 8.00
C) 0
D) 7.27

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

An Introduction to Derivative Securities Financial Markets and Risk Management

ISBN: 978-0393913071

1st edition

Authors: Robert A. Jarrow, Arkadev Chatterjee

See More Books

Question Posted: Feb 15, 2018 07:48 AM

See More Questions

Assume that interest rate parity exists. You expect that the one-year nominal interest rate in the United States is 7 percent, while the one-year nominal interest rate in Australia is 11 percent. The...
Suppose you buy a one-year European call option on Wombat stock with an exercise price of $100 and sell a one-year European put option with the same exercise price. The current stock price is $100,...
Assume that interest rate parity exists. You expect that the one-year nominal interest rate in the United States is 7 percent, while the one-year nominal interest rate in Australia is 11 percent. The...
Which is the most costly option (in terms of impact in other parts of the organization, not absolute dollars)? Which is the least costly?
An elevator is moving upward at a constant speed of 2.50 m/s. A bolt in the elevator ceiling 3.00 m above the elevator floor works loose and falls. (a) How long does it take for the bolt to fall to...
Eastman Kodak Company is a provider of imaging technology products and services to the photographic, graphic communications, and health-care markets. A condensed 2008 income statement follows (in...
On January 1, 2009, Mitchell Company has a net book value of $ 1,500,000 as follows: LO4 1,000 shares of preferred stock; par value $100 per share; cumulative, nonparticipating, nonvoting; call value...
Scarlett Incorporated purchased a tract of land with an office building and equipment included. The cash purchase price was $ 900,000 plus $ 50,000 in fees connected with the purchase. The following...
Use the following information ( in thousands ) : \ table [ [ Service Revenue, 1 , 6 0 0 , 0 0 0
The Graphic Palette is a firm in Charleston, South Carolina, that does graphic artwork and produces color and black-and-white posters, lithographs, and banners. The firm's owners, Kathleen and...
Bay Pines Medical Center estimates that a capitates population of 50,000 would have the following base case utilization and total cost characteristics: In addition to medical costs, Bay Pines...
Isaac only has $690 today but needs $800 to buy a new laptop. How long will he have to wait to buy the laptop if he earns 5.4 percent compounded annually on his savings? a. 2.29 years b. 2.48 years...
Which of the following is an advantage of a flash drive over a hard disk drive? a. It uses removable media b. It holds more data c. It retrieves data more quickly d. None of the above
Suppose a small flashlight bulb is on the bottom of the bathtub of Problem 19, directly under the toy boat. When this bulb is lit and the ceiling light is turned off, how does the size of the shadow...
Draw a scatter diagram and find $r$ for the data shown in each table in Problems 25-30. X 85 90 y 80 40 100 30 102 28 105 25
Rothera Point Utilities (RPU) provides customers with 7 million megawatt-hours (MWh) of electricity each year. RPU operates three different generation facilities to meet this demand: the Rothera...
Explain the components of the path evaluation function f(node) used by A*. Do you think it is the best evaluation function that could be used? To what kinds of problems might it be best suited? And...
Celvin FoodStuff operates a chain of mini conve- nience stores in downtown city settings, offering beverages, snack food, and some fresh food items to passing pedestrian traffic. A typical Celvin...
Trayer Corporation has income from continuing operations of $290,000 for the year ended December 31, 2025. It also has the following items (before considering income taxes). 1. An unrealized loss of...
Consider the setup in Problem 16. Show that the relative speed of the ball and the point of contact on the stick is the same before and immediately after the collision. (This result is analogous to...
The temperature dependence of the vapour pressure of solid sulfur dioxide can be approximately represented by the relation log (p/Torr) = 10.5916 - 1871.2/ (T/K) and that of liquid sulfur dioxide by...
The temperature dependence of the vapour pressure of solid sulfur dioxide can be approximately represented by the relation log (p/Torr) = 10.5916 - 1871.2/ (T/K) and that of liquid sulfur dioxide by...
The temperature dependence of the vapour pressure of solid sulfur dioxide can be approximately represented by the relation log (p/Torr) = 10.5916 - 1871.2/ (T/K) and that of liquid sulfur dioxide by...
Chapter o Homew ebook 50,000-unit production quantity: $ 227,049 7 70,000-unit production quantity: $ 66,751 d. In addition to mean profit, what other factors should FTC consider in determining a...
Diamond makes downhill ski equipment. Assume that comic has offered to produce ski poles for Diamond for $20 per pair Diamond needs 200,000 pairs of poles per period Diamond can only avoid 5150,000...
17? Which of the following statement is true Select one: a. All evidence must have the same level of reliability b. All evidence must have the same level of persuasiveness C. All are false d....

Suppose you buy a one year forward contract at $65. At expiration, the spot price is $73

Question:

Step by Step Answer:

a 800 positive Since the questions concerns on value at expi...View the full answer

An Introduction to Derivative Securities Financial Markets and Risk Management

Students also viewed these Corporate Finance questions