Ask Question
13 July, 12:16

Suppose that you enter into a 6-month forward contract on a non-dividend-paying stock when the stock price is $30 and the risk-free interest rate (with continuous compounding) is 5% per annum. What is the forward price

+3
Answers (1)
  1. 13 July, 14:36
    0
    Forward price = $30.7595

    Explanation:

    The forward price is a future predetermined price for a commodity, asset, or currency based on agreement between parties to a forward contract.

    The forward contract is an agreement to sell between parties to buy or sell at an agreed price at some time in the future.

    Time (t) = 6 months = 0.5 years

    Spot price (s) = $30

    Risk free interest rate (r) = 5%

    Forward price = s * e^rt

    Forward price = 30 * (e^0.05*0.5)

    Forward price = 30 * 1.025315

    Forward price = $30.7595
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Suppose that you enter into a 6-month forward contract on a non-dividend-paying stock when the stock price is $30 and the risk-free ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers