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4. XXX Corporation signed a forward contract on August 15, 2020 that will mature on February 15, 2021. The underlying asset is the stock of ZZZ, a FinTech Company. It is believed that ZZZ will not distribute any dividends in 2020 and 2021. The continuously compounded risk-free rate is a constant 3% over time. The stock price of ZZZ was $40 on August 15, 2020. (a) What is the strike price of the forward contract?

4. XXX Corporation signed a forward contract on August 15, 2020 that will mature on February 15, 2021. The underlying asset is the stock of ZZZ, a FinTech Company. It is believed that ZZZ will not distribute any dividends in 2020 and 2021. The continuously compounded risk-free rate is a constant 3% over time. The stock price of ZZZ was $40 on August 15, 2020. (a) What is the strike price of the forward contract?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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4. XXX Corporation signed a forward contract on August 15, 2020 that will mature on February 15, 2021. The underlying asset is the stock of ZZZ, a FinTech Company. It is believed that ZZZ will not distribute any dividends in 2020 and 2021. The continuously compounded risk-free rate is a constant 3% over time. The stock price of ZZZ was $40 on August 15, 2020. (a) What is the strike price of the forward contract?
Transcribed Image Text:4. XXX Corporation signed a forward contract on August 15, 2020 that will mature on February 15, 2021. The underlying asset is the stock of ZZZ, a FinTech Company. It is believed that ZZZ will not distribute any dividends in 2020 and 2021. The continuously compounded risk-free rate is a constant 3% over time. The stock price of ZZZ was $40 on August 15, 2020. (a) What is the strike price of the forward contract?
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