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Business, 17.10.2019 22:00 tearaj

Suppose you enter into a 9-month long forward contract on a non-dividend-paying stock when the stock price is s0 = $125 and the risk-free rate is 2.0% per annum with continuous compounding. (a) what are the forward price (f0) and the initial value of the forward contract? (b) three months later, the price of the stock (s0) is $112, and the risk-free remains 2.0%. what are the forward price (f0) and the value of the forward contract? (c) another month later (4 months from today), the risk-free rate increases to 2.25% while the stock price stays $112.

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Suppose you enter into a 9-month long forward contract on a non-dividend-paying stock when the stock...

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