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

Expert Solution

jeff jeffy answered 1 year ago
Next > < Previous

Related 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...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT