A non-dividend-paying stock is currently worth $59. A forward contract on the stock expires in 0.9 years. The T-bill rate is 7% (continuously compounded) for all maturities. Part 1 What is the forward price? Correct ✓ F0=S0erT�0=�0��� = 59e0.07⋅0.959�0.07⋅0.9 = 62.84 Part 2 What is the value of the forward contract to the long? Part 3 10 days later, the stock has fallen to $52.31. What is the new forward price? Part 4 What is the value of the forward contract to the long?
A non-dividend-paying stock is currently worth $59. A forward contract on the stock expires in 0.9 years. The T-bill rate is 7% (continuously compounded) for all maturities. Part 1 What is the forward price? Correct ✓ F0=S0erT�0=�0��� = 59e0.07⋅0.959�0.07⋅0.9 = 62.84 Part 2 What is the value of the forward contract to the long? Part 3 10 days later, the stock has fallen to $52.31. What is the new forward price? Part 4 What is the value of the forward contract to the long?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
A non-dividend-paying stock is currently worth $59. A forward contract on the stock expires in 0.9 years. The T-bill rate is 7% (continuously compounded) for all maturities.
Part 1
What is the forward price?
Correct ✓
F0=S0erT�0=�0���
= 59e0.07⋅0.959�0.07⋅0.9
= 62.84
Part 2
What is the value of the forward contract to the long?
Part 3
10 days later, the stock has fallen to $52.31. What is the new forward price?
Part 4
What is the value of the forward contract to the long?
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