3) Three months later, the price of the stock becomes $99 per share and the risk-free rate is 10% per annum with continuous compounding. What is the forward price now for a contract on the same stock with the same delivery date as the one that the trader has entered into?

Algebra and Trigonometry (6th Edition)
6th Edition
ISBN:9780134463216
Author:Robert F. Blitzer
Publisher:Robert F. Blitzer
ChapterP: Prerequisites: Fundamental Concepts Of Algebra
Section: Chapter Questions
Problem 1MCCP: In Exercises 1-25, simplify the given expression or perform the indicated operation (and simplify,...
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3) Three months later, the price of the stock becomes $99 per share and the risk-free rate is 10% per annum with
continuous compounding. What is the forward price now for a contract on the same stock with the same delivery date
as the one that the trader has entered into?
Answer: 104.075
4) Three months after the trader enters into the original forward contract, what is the value of the original contract to
the trader now? (Based on the same information as in part 3), i.e., the stock price is now $99 and the risk-free rate is
10%).
Answer: -37.1801
Transcribed Image Text:3) Three months later, the price of the stock becomes $99 per share and the risk-free rate is 10% per annum with continuous compounding. What is the forward price now for a contract on the same stock with the same delivery date as the one that the trader has entered into? Answer: 104.075 4) Three months after the trader enters into the original forward contract, what is the value of the original contract to the trader now? (Based on the same information as in part 3), i.e., the stock price is now $99 and the risk-free rate is 10%). Answer: -37.1801
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