Calculation Of Forward Price Of Dividend Security
Question
For the following questions assume the risk free rate of return is 2.50%. Your company imports large quantities of oil. On January 1st 2011 the spot price of oil is $70. You are concerned that recent events will drive the price of oil higher in 90 days time when you will need to purchase a large quantity. Under these circumstances calculate the price of a forward contract. In 90 days time the spot price of oil is $125; calculate the profit or loss of your forward position. What is the 10 month forward price of a dividend security based on the following information:
|
Current price |
$110.00 |
|
Quarterly dividend |
$1.00 |
|
Dividend payment dates: |
3M, 6M, 9M |
Summary
The question belongs to Finance and it discusses about calculation of forward price of a dividend security. The calculation has been given in the solution.
Total Word Count 24