Investor considers entering a 1Y forward contract for a delivery of 5 shares of company ABC which he currently holds. Current price of one share is 80 EUR. At the end of each 6M company ABC pays its shareholders 15 EUR of dividend per share. Additionally investor holding shares has to pay a brokerage acount fee in amount of 2 EUR per share at the end of each quarter. What should be the minimal price of one share expected under this contract, if the market zero rates per annum (continuous compunding) quoted currently are the following: Period Zero-rates 3M 2,00% 6M 2,40% 9M 3,00% 12M 3,20%

Investor considers entering a 1Y forward contract for a delivery of 5 shares of company ABC which he currently holds. Current price of one share is 80 EUR. At the end of each 6M company ABC pays its shareholders 15 EUR of dividend per share. Additionally investor holding shares has to pay a brokerage acount fee in amount of 2 EUR per share at the end of each quarter. What should be the minimal price of one share expected under this contract, if the market zero rates per annum (continuous compunding) quoted currently are the following: Period Zero-rates 3M 2,00% 6M 2,40% 9M 3,00% 12M 3,20%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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