Suppose a stock is currently (time t = 0) worth 100. Further, suppose the one year annually compounded interest rate is 2%, and the two year annually compounded rate is 3%. Find the following: a) The forward price for a forward contract on the stock with maturity year T1 = 1. b) The forward price for a forward contract on the stock with maturity year T2 = 2. c) The forward price for a forward contract with maturity T1 = 1 on a ZCB with maturity T2 = 2. d) The forward price for a forward contract with maturity T1 = 1 on a forward contract on the stock with maturity T2 = 2 and delivery price K = 101.
Suppose a stock is currently (time t = 0) worth 100. Further, suppose the one year annually compounded interest rate is 2%, and the two year annually compounded rate is 3%. Find the following: a) The forward price for a forward contract on the stock with maturity year T1 = 1. b) The forward price for a forward contract on the stock with maturity year T2 = 2. c) The forward price for a forward contract with maturity T1 = 1 on a ZCB with maturity T2 = 2. d) The forward price for a forward contract with maturity T1 = 1 on a forward contract on the stock with maturity T2 = 2 and delivery price K = 101.
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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Suppose a stock is currently (time t = 0) worth 100. Further, suppose the one year annually
a) The forward price for a forward contract on the stock with maturity year T1 = 1.
b) The forward price for a forward contract on the stock with maturity year T2 = 2.
c) The forward price for a forward contract with maturity T1 = 1 on a ZCB with maturity T2 = 2.
d) The forward price for a forward contract with maturity T1 = 1 on a forward contract on the stock with maturity T2 = 2 and delivery price K = 101.
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