If the continuous annual risk-free rate is 5% and Apple is going to pay a $3 dividend once per year for the next 5 years, what is the prepaid forward price for a contract with 5 years to maturity, given a current price of $225? Round to the nearest cent. Hint: assume maturity is immediately after the fifth dividends. If the correct answer is 212.06, what are the steps to get this answer?
If the continuous annual risk-free rate is 5% and Apple is going to pay a $3 dividend once per year for the next 5 years, what is the prepaid forward price for a contract with 5 years to maturity, given a current price of $225? Round to the nearest cent. Hint: assume maturity is immediately after the fifth dividends. If the correct answer is 212.06, what are the steps to get this answer?
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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Transcribed Image Text:If the continuous annual risk - free rate is 5% and Apple is going to pay a $3 dividend once per year for
the next 5 years, what is the prepaid forward price for a contract with 5 years to maturity, given a
current price of $225? Round to the nearest cent. Hint: assume maturity is immediately after the fifth
dividends. If the correct answer is 212.06, what are the steps to get this answer?
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