Problemvalue of the forward contract an investor would like, Ask an Expert

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Problem:

Value of the forward contract: An investor would like to buy a one-year forward contract on a dividend-paying stock. The stock will pay a $1.75/share dividend in 50 days and another $2.00/share dividend in 140 days. The stock is currently trading at $45 and the risk free rate is 10%.

Answer the following questions:

Question 1: What is the fair forward price?

Question 2: After 60 days, the stock price increases to $48. What is the current value of the forward contract to the investor?

Describe in detail and describe all workings out.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91146111

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