Ask Question
14 August, 22:28

Suppose that you enter into a 6-month forward contract on a non-dividend-paying stock when the stock price is $30 and the risk-free interest rate (with continuous compounding) is 5% per annum. What is the forward price

+1
Answers (1)
  1. 15 August, 02:07
    0
    Forward price = $30.7595

    Explanation:

    The forward price is a future predetermined price for a commodity, asset, or currency based on agreement between parties to a forward contract.

    The forward contract is an agreement to sell between parties to buy or sell at an agreed price at some time in the future.

    Time (t) = 6 months = 0.5 years

    Spot price (s) = $30

    Risk free interest rate (r) = 5%

    Forward price = s * e^rt

    Forward price = 30 * (e^0.05*0.5)

    Forward price = 30 * 1.025315

    Forward price = $30.7595
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Suppose that you enter into a 6-month forward contract on a non-dividend-paying stock when the stock price is $30 and the risk-free ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers