A 6 month, short forward contract was negotiated 3 monthsago when the spot price of the underlying asset was $400and the risk-free rate of interest was 4% per year. Thecurrent spot price of the underlying is $450 and the 3-month risk-free rate (with continuous compounding) is 3%per year. The current value of the short forward contract is:O-44.97O-43.97O-51.99O+48.00

Step 1: To calculate the current value of the short forward contract, we can use the formula for the…

Answered: A 6 month, short forward contract was…

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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A contract requires lease payments of $700 at the beginning of every month for 4 years. a. What is the present value of the contract if the lease rate is 4.75% compounded annually? Round to the nearest cent b. What is the present value of the contract if the lease rate is 4.75% compounded monthly? Round to the nearest cent
A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $36.2 and the risk-free rate of interest is 4% per annum (cont. comp). What is the value of the forward contract 8 months later if the price of the stock is $38.5 and the risk-free rate interest rate is still 4%. (round to the nearest 0.01)
12 . Consider a T-bill that will have a 125 days to maturity at the time of forward contract expiration. The forward in this T-Bill is quoted at a discount of 1.24%. At expiration, the amount the long will pay the short for delivery of T-bill worth $1m par is closest to: A. $995,694.44 B. $995,753.42 C. $987,600
hmed has two options Option a: An investment of OMR. 150000 in a bond which pays 6.05% interest for 9 years Option b: A Bank deposit of OMR. 150000 which pays 6.75% interest for 9 years but compounding is done quarterly. Calculate future value. Select one: a. Option a: 244499.70, Option b: 253983.50 b. NONE c. Option a: 254499.72, Option b: 273983.10 d. Option a: 215499.75, Option b: 273983.20
Jon establishes a long position of one T-bond future today for a settlement price of 101'02. The exchange requires an initial margin of $2700 and a maintenance margin of $2500. Below are the next two days closing price on this contract. Day 1: settlement price100'31 Day 2: settlement price 99'30 The margin account balance after two days is Numeric Response dollars
A lease with a term of 4 years calls for annual payments of $3,400. The leased asset would cost $11,300 to buy and would be depreciated straight-line to a zero salvage value over the 4 years. The actual salvage value is negligible. The firm can borrow at a rate of 6 percent. What is the NPV of the lease relative to the purchase if the lessee's tax rate is 21 percent? X -$1,699 $197 -$399 -$194 $23,107
A contract has been signed to lease a building at P21.483 per year with an annual increase of P1,045 for 10 years Payments are to be made at the end of each year, starting one year from now. The prevailing interest rate is 8.78%.What lump sum paid today would be equivalent to the 10-year lease -payment plan?
Four-year lease agreement requires payments of P10000 at the beginning of everyyear. If the interest rate is 6% compounded monthly, what is the cash value of thelease?
Consider a 5-year lease for a $400,000 bottling machine, with a residual market value of $120,000 at the end of 5 years. If the risk-free interest rate is 5.4% APR with monthly compounding, compute the monthly lease payment in a perfect market for the following leases: a. A fair market value lease. b. A $1.00 out lease. c. A fixed price lease with an $71,000 final price. a. A fair market value lease. The present value of the lease payments is $ A fair market value lease would be $ (Round to the nearest dollar.) (Round to the nearest dollar.) b. A $1.00 out lease. A $1.00 out lease would be $ (Round to the nearest dollar.) c. A fixed price lease with an $71,000 final price. The present value of the lease payments is $ (Round to the nearest dollar.) A fixed price lease with an $71,000 final price would be $. (Round to the nearest dollar.)
Red Sun Rising Corporation has just signed a lease for its new manufacturing facility. The lease agreement calls for annual payments of $1,150,000 for 25 years with the first payment due today. If the interest rate is 3.27 percent, what is the value of this liability today? Multiple Choice $20,071,320.72 $21,074,886.75 $19,435,771.00 $18,463,982.45
Assume that we entered into a one-year forward contract with price $300 today. Nine months later, the observed price of the stock is $350 and the interest rate is 8% per annum. The value of the existing forward contract expiring in three months will be closest to: A. 49.05. B. 55.72. C. –55.72. D. −49.05.

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