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LOS b: Calculate and interpret the price and the value of an equity forward contract, assuming dividends are paid either discretely or continuously.
Q1. Calculate the no-arbitrage forward price for a 90-day forward on a stock that is currently priced at $50.00 and is expected to pay a dividend of $0.50 in 30 days and a $0.60 in 75 days. The annual risk free rate is 5% and the yield curve is flat.
A) $50.31.
B) $49.49.
C) $48.51.
Q2. An index is currently 965 and the continuously compounded dividend yield on the index is 2.3%. What is the no-arbitrage price on a one-year index forward contract if the continuously compounded risk-free rate is 5%.
A) 991.4.
B) 991.1.
C) 987.2.
Q3. Jim Trent, CFA has been asked to price a three month forward contract on 10,000 shares of Global Industries stock. The stock is currently trading at $58 and will pay a dividend of $2 today. If the effective annual risk-free rate is 6%, what price should the forward contract have? Assume the stock price will change value after the dividend is paid.
A) $56.85.
B) $56.82.
C) $58.85.
Q4. The value of the S& 500 Index is 1,260. The continuously compounded risk-free rate is 5.4% and the continuous dividend yield is 3.5%. Calculate the no-arbitrage price of a 160-day forward contract on the index.
A) $562.91.
B) $1,310.13.
C) $1,270.54.
Q5. A stock is currently priced at $110 and will pay a $2 dividend in 85 days and is expected to pay a $2.20 dividend in 176 days. The no arbitrage price of a six-month (182-day) forward contract when the effective annual interest rate is 8% is closest to:
A) $110.00.
B) $110.06.
C) $110.20. | 
发表于 2009-3-27 16:07
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