) Assume that the risk-free rate is 7% per annum (continuous compounding) for all maturities. Compute the three-month forward prices of the following assets: i) A share that will distribute a $8 dividend in 2 months and a $12 dividend in six months. The current spot price of the share is $85. ii) The Swiss franc. The current spot price is 1.4 dollars for 1 Swiss franc and the foreign (i.e., the Swiss) risk-free rate is 6% per annum (continuous compounding).
) Assume that the risk-free rate is 7% per annum (continuous compounding) for all maturities. Compute the three-month forward prices of the following assets: i) A share that will distribute a $8 dividend in 2 months and a $12 dividend in six months. The current spot price of the share is $85. ii) The Swiss franc. The current spot price is 1.4 dollars for 1 Swiss franc and the foreign (i.e., the Swiss) risk-free rate is 6% per annum (continuous compounding).
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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1) Assume that the risk-free rate is 7% per annum (continuous compounding) for all maturities. Compute the three-month forward prices of the following assets:
i) A share that will distribute a $8 dividend in 2 months and a $12 dividend in six months. The current spot price of the share is $85.
ii) The Swiss franc. The current spot price is 1.4 dollars for 1 Swiss franc and the foreign (i.e., the Swiss) risk-free rate is 6% per annum (continuous compounding).
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