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1) Spot price of XYZ today is= $12, and annual risk free rate of return is Rf = 3%. It is known that ABC doesn’t pay dividends in next year. Determine the forward price of XYZ for delivery 1 year from today? For delivery 6 months from today? For delivery today?

2) Stocks of XYZ and ABC are traded at the same price of= $19 a share. Historical returns of ABC are more unstable than those of XYZ and show higher systematic risk. Neither ABC nor XYZ will pay dividends in month. Consider forward contracts on these 2 stocks with 3 months to maturity. Must the forward price for ABC be lower than forward price for XYZ? describe why or why not?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M914665

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