Consider a stock whose stock price is 100 on january 1, Ask an Expert

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Consider a stock whose stock price is $ 100 on January 1, 2016. This stock pays a dividend of $ 4 at the end of every quarter. You are Holding a Forward contract with delivery date of January 1, 2017. Assume the interest rate is 6% compounded continuously.

a) What is the no-arbitrage Forward Price for the above Forward contract?

b) If you want to sell your Forward contract on July 1, 2016, what no- arbitrage price will you be able to get, if the stock price is $ 105 on that day.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92384097

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