The current price of XYZ stock is $103. The seven month forward price for XYZ stock is $106. Assume that no dividends are paid before maturity. If the forward price is determined by no arbitrage pricing, then the continuously compounded interest rate is: [provide your answer in percent per year, for instance, 3.21 for 3.21%, round to two decimals]

The current price of XYZ stock is $103. The seven month forward price for XYZ stock is $106. Assume that no dividends are paid before maturity. If the forward price is determined by no arbitrage pricing, then the continuously compounded interest rate is: [provide your answer in percent per year, for instance, 3.21 for 3.21%, round to two decimals]

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 14P

See similar textbooks

Similar questions

Avondale Aeronautics has perpetual preferred stock outstanding with a par value of $100. The stock pays a quarterly dividend of $3.00 and its current price is $84. What is its nominal annual rate of return? Do not round intermediate calculations. Round your answer to two decimal places. ? % What is its effective annual rate of return? Do not round intermediate calculations. Round your answer to two decimal places. ? %
Avondale Aeronautics has perpetual preferred stock outstanding with a par value of $100. The stock pays a quarterly dividend of $1.00 and its current price is $112. What is its nominal annual rate of return? Do not round intermediate calculations. Round your answer to two decimal places.
Arondale Aeronautics has perpetual preferred stock outstanding with a par value of $100. The stock pays a quarterly dividend of $3, and its current price is $100. A. What is its nominal annual rate of return? Do not round your intermediate calculations. Round your answer to two decimal places. B. What is its effective annual rate of return? Do not round your intermediate calculations. Round your answer to two decimal places.
The spot price of a stock is $100 and the continuous compounding risk-free rate for all maturities is 9%. The stock pays a $5 dividend only six months later this year. What is the equilibrium price of one-year forward contract
BUG’s stock price S is $143 today. It pays a dividend of $2 after 2 and a half months. If the continuously compounded interest rate is 1.1 percent per year, then the 2-month forward price on BUG stock is [round to two decimals]
Each quarter, Crane, Inc., pays a dividend on its perpetual preferred stock. Today the stock is selling at $65.00. If the required rate of return for such stocks is 12.00 percent, what is the quarterly dividend paid by this Crane? (Round answer to 2 decimal places, e.g. 15.25.) Quarterly dividend paid$______
Suppose XYZ stock pays no dividends and has a current price of $50. The forward price for delivery in 1 year is $55. Suppose the 1-year eective annual interest rate is 10%. (a) Graph the payo and prot 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?
Pasqually Mineral Water, Inc., will pay a quarterly dividend per share of $1.10 at the end of each of the next 12 quarters. Thereafter, the dividend will grow at a quarterly rate of 1.6 percent, forever. The appropriate rate of return on the stock is 11 percent, compounded quarterly. What is the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
SleazeCo stock is currently at $100 per share. There are puts and calls written on SleazeCo stock that expire in one year and have a strike price of $100. The continuously compound risk-free rate of interest is .01 (1%) per annum. The price of the call is $3.00 and the price of the put is $3.00. Is there an arbitrage opportunity? How do you know?
If the stock market index is at a level of 1,120 and the one-year forward on the index is 1,210, what is the implied repo rate in continuously-compounded terms (assuming zero dividends on the index)? (a) 5.72% (b) 6.52% (c) 7.72% (d) 8.62%
Smiling Elephant, Inc., has an issue of preferred stock outstanding that pays a $5.20 dividend every year, in perpetuity. If this issue currently sells for $80.20 per share, what is the required return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
If the discount rate is 9%, what is the present value of 5375 USD received at the end of each year for 12 years?a) 25000,375b) 10000,5c) 12450,5d) 15500,375e) 38490,375 ============== The price / earnings ratio of the beta company stock has been calculated as 7.4. If the expected earnings per share of this stock for the next year is 2.5 USD, what is the real value of the stock? If the stock of this company is currently trading at 25 USD, can the relevant stock be purchased? a) 18.5 and should not be boughtb) 36 and must be purchasedc)45 and must be purchased d) 18.5 and must be purchasede) 40 and should not be bought