You enter into a 9-month forward contract on a non-dividend paying stock when the stock price is £38 and the risk-free interest rate is 10% per annum (assume discrete compounding). Which of the below is closest to the no-arbitrage forward price? a. $40 b. $39 c. $41 d. $38
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- You enter into a 9-month forward contract on a non-dividend paying stock when the stock price is £35 and the risk-free interest rate is 12% per annum (assume discrete compounding). Which of the below is closest to the no-arbitrage forward price? a. $39 b. $40 c. $41 d. $38suppose that you enter into a six-month forward contract on a non-dividend paying stock when the stock price is $30 and the risk-free interest rate(with continuous compounding) is 12% per annum. what is the forward price? a) $30.89 b) $31.86 c) $34.56 d) $32.15A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $40 and the risk-free rate of interest is 10% per annum with continuous compounding. (a) What are the forward price and the initial value of the forward contract? (b) Six months later, the price of the stock is $45 and the risk-free interest rate is still 10%. What are the forward price and the value of the forward contract?
- The current price of a stock paying no income is 30. Assume the annually compounded zero rate will be 3% for the next 2 years. (a) Find the current value of a forward contract on the stock if the delivery price is 25 and maturity is in 2 years. (b) If the stock has price 35 at maturity, find the value of the forward from part (a) to the long counterparty at maturityA stock has a spot price of $200. The stock pays a $5 dividend in 6 months. The continuous compounding risk-free rate for all maturities is 9%. What is the equilibrium price of a 2-year forward contract?Suppose that you, on 1st of January 2023, enter a long position in a 10-year forward contract on a non-dividend-paying stock. The stock price is $50 and the risk-free rate of interest is 5% per annum with yearly compounding (as per 1st of January 2023). Five years later, 1st of January 2028, the price of the stock is $60 and the risk-free interest is still 5%. b) On 1st of January 2028, what are the forward price and the value of the forward contract that you entered into on 1st of January 2023? Explain. c) Suppose that you on 1st of January 2028 enter a short position in a forward contract on the same underlying stock and with expiration date in 5 years. What is the value of your total position? (I.e. what is the total value of the long position in the forward contract in a) and your short position). What is the payoff of your total position at maturity? d) On 1st of January 2028, what is the value to the party holding the short position in the contract entered into on 1st of…
- A stock is expected to pay a dividend of $1 per share in 2 months and in 5 months. The stock price is $60, and the risk-free rate of interest is 5% per annum with continuous compounding for all maturities. An investor has just taken a short position in a 6-month 1. What are the forward price and the initial value of the forward contract? [Hint: what's the value of a forward contract at the initiation of the contract? 2.Three months later, the price of the stock is $52 and the risk-free rate of interest is still 8% per annum. What is the forward price of a new forward contract with the same expiration date as above? What is the value of the short position in the oldSuppose 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?Suppose that you, on 1st of January 2023, enter a long position in a 10-year forward contract on a non-dividend-paying stock. The stock price is $50 and the risk-free rate of interest is 5% per annum with yearly compounding (as per 1st of January 2023). a) What are the forward price and the initial value of the forward contract? Five years later, 1st of January 2028, the price of the stock is $60 and the risk-free interest is still 5%. b) On 1st of January 2028, what are the forward price and the value of the forward contract that you entered into on 1st of January 2023? Explain. c) Suppose that you on 1st of January 2028 enter a short position in a forward contract on the same underlying stock and with expiration date in 5 years. What is the value of your total position? (I.e. what is the total value of the long position in the forward contract in a) and your short position). What is the payoff of your total position at maturity? d) On 1st of January 2028, what is the value…
- A speculator sells a stock short for $71 a share. The company pays a $2.50 annual cash dividend.After a year has passed, the seller covers the short position at $63. If the margin requirement is55 percent, what is the percentage return earned on the investment? Redo the calculations, assuming the price of the stock is $78 when the investor closes theposition. Based on your calculations to both scenarios, what generalization can be inferred?The shares of TIC Ltd. are currently priced at $ 415 and call option exercisable in three months' time has an exercise rate of $ 400. Risk free interest rate is 5% p.a. and standard deviation (volatility) of share price is 22%. Based on the assumption that TIC Ltd. is not going to declare any dividend over the next three months, what is the price of call option? Solve it on excel.You enter into a 1-year futures contract on a non-dividend paying stock when the stock price is $100 and the risk-free interest rate is 5% per annum. Six months later the stock price has fallen to $90, and the interest rate is 4% per annum. Which of the answers below is closest to the change in the futures price? Assume discrete compounding and discounting. Question 6Answer a. -12.34 b. -11.40 c. -10.00 d. -13.20