Question
In: Finance
A stock is expected to pay a dividend of $0.50 per share in two month, in...
A stock is expected to pay a dividend of $0.50 per share in two month, in five months and in eight months. The stock price is $20, and the risk-free rate of interest is 5% per annum with continuous compounding for all maturities. You have just taken a short position in a nine-month forward contract on the stock. Seven months later, the price of the stock has become $23 and the risk-free rate of interest is still 5% per annum. What is the value your position seven months later?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
A stock is expected to pay a dividend of $0.50 per share in two month, in...
A stock is expected to pay a dividend of $0.50 per share in two
month, in five months and in eight
months. The stock price is $20, and the risk-free rate of interest
is 5% per annum with continuous
compounding for all maturities. You have just taken a short
position in a nine-month forward contract
on the stock. Seven months later, the price of the stock has become
$23 and the risk-free rate of
interest is still 5% per annum....
A stock is expected to pay a dividend of $0.70 per share in one month, in...
A stock is expected to pay a dividend of $0.70 per share in one
month, in four months and in seven months. The stock price is $30,
and the risk-free rate of interest is 7% per annum with continuous
compounding for all maturities. You have just taken a short
position in an eight-month forward contract on the stock. Six
months later, the price of the stock has become $34 and the
risk-free rate of interest is still 7% per annum....
A stock is expected to pay a dividend of$1 per share in 3-month and in 9-month....
A stock is expected to pay a dividend of$1 per share in 3-month
and in 9-month. The stock price is$80. An investor has just taken a
long position in a 12-month futures contract on the stock. The zero
ratesfor 3-, 6-, 9-, 12-month are 5%, 5.5%, 6% and 6.5% per annum
with continuous compounding, respectively.6-month later, the stock
price is$82. The zero rates happen to be the implied forward rates
6-month ago.What is the value of the long position in...
A stock is expected to pay a dividend of $1.25 per share in two months and...
A stock is expected to pay a dividend of $1.25 per share in two
months and in five months. The stock price is $127, and the
risk-free rate of interest is 5% p.a. with continuous compounding
for all maturities. An investor has just taken a long position in a
six-month forward contract on the stock.
a) What are the forward price and the initial value of the
forward contract?
b) Three months later, the price of the stock is $135...
A stock is expected to pay a dividend of $0.80 per share in two months, in...
A stock is expected to pay a dividend of $0.80 per share in two
months, in five months and in eight
months. The stock price is $35, and the risk-free rate of interest
is 8% per annum with continuous
compounding for all maturities. You have just taken a long position
in a nine-month forward contract
on the stock. Seven months later, the price of the stock has become
$38 and the risk-free rate of
interest is still 8% per annum....
A stock is expected to pay a dividend of $1 per share in two months and...
A stock is expected to pay a dividend of $1 per share in two
months and in five months. The stock price is $50, and the
risk-free rate of interest is 8% per annum with continuous
compounding for all maturities. An investor has just taken a short
position in a six-month forward contract on the stock.
Required
What are the forward price and the initial value of the forward
contract?
Three months later, the price of the stock is $48...
If a company pays a dividend of $0.50 per share and this dividend is expected to...
If a company pays a dividend of $0.50 per share and this
dividend is expected to rise at a constant rate of 5%, what
dividend amount will be paid in 40 years?
A stock is expected to pay a dividend of $2.74 per share next year, $3.2 two...
A stock is expected to pay a dividend of $2.74 per share next
year, $3.2 two years from now, and $3.38 three years from now.
After that, the dividend is expected to grow at a constant rate of
5% per year indefinitely. The required return on the stock is 9%.
The estimated price per share is $___________.
Rounding and Formatting: Do not enter a dollar sign in your
response. Round your answer to 2 decimal places. Example: If your
answer...
A stock is expected to pay a dividend of $1.50 per share in three months and...
A stock is expected to pay a dividend of $1.50 per share in
three months and in six months. The stock price is $60, and the
risk-free rate of interest is 8% per annum with continuous
compounding for all maturities. An investor has just taken a short
position in a nine-month forward contract on the stock.
What are the forward price and the initial value of the forward
contract?
Three months later, the price of the stock is $55 and...
A stock is expected to pay a dividend of $2 per share in three months. The...
A stock is expected to pay a dividend of $2 per share in three
months. The share price is $75, and the risk-free rate of interest
is 8% per annum with continuous compounding for all maturities. An
investor has just taken a long position in a six-month forward
contract on a share of stock.
a) What are the forward price and the initial value of the
forward contract?
b) Three months later, immediately after the payment of the
dividend, the...
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