Intro You anticipate the receipt of money in 190 days, which you will use to purchase stocks in a particular company. The stock is currently selling for $76 and will pay a $0.5 dividend in 50 days and another $0.6 in 140 days. The risk-free rate is 4% (with continuous compounding) for all maturities. You go long a forward contract on the stock. Part 1 At what price would you be willing to buy the stock in 190 days through a forward contract? 0+ decimals Submit Part 2 Suppose you agree to the contract at the price you found in the previous part. 90 days later, the stock has fallen to $70.82. What is the value of the forward contract? 1+ decimals

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
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Q.3

Please all part answer ?

Part 3
What is the new forward price?
0+ decimals
Submit
Transcribed Image Text:Part 3 What is the new forward price? 0+ decimals Submit
Intro
You anticipate the receipt of money in 190 days, which you will use to purchase stocks in a
particular company. The stock is currently selling for $76 and will pay a $0.5 dividend in 50
days and another $0.6 in 140 days.
The risk-free rate is 4% (with continuous compounding) for all maturities. You go long a
forward contract on the stock.
Part 1
At what price would you be willing to buy the stock in 190 days through a forward contract?
0+ decimals
Submit
Part 2
Suppose you agree to the contract at the price you found in the previous part. 90 days later,
the stock has fallen to $70.82. What is the value of the forward contract?
1+ decimals
Submit
Transcribed Image Text:Intro You anticipate the receipt of money in 190 days, which you will use to purchase stocks in a particular company. The stock is currently selling for $76 and will pay a $0.5 dividend in 50 days and another $0.6 in 140 days. The risk-free rate is 4% (with continuous compounding) for all maturities. You go long a forward contract on the stock. Part 1 At what price would you be willing to buy the stock in 190 days through a forward contract? 0+ decimals Submit Part 2 Suppose you agree to the contract at the price you found in the previous part. 90 days later, the stock has fallen to $70.82. What is the value of the forward contract? 1+ decimals Submit
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