Value of the forward contract an investor would like to buy, Ask an Expert

Management Studies

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%.

a) What is the fair forward price?

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

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Business Management, Management Studies

Category:- Business Management
Reference No.:- M91260379

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