The dividend yield of a portfolio of shares with current price of £673,000 is 2.8% pa payable continuously. Calculate the forward price of a one-year forward contract, based on the portfolio, if we assume dividends are received continuously and the risk - free rate of interest is 4.6028% pa effective.

The dividend yield of a portfolio of shares with current price of £673,000 is 2.8% pa payable continuously. Calculate the forward price of a one-year forward contract, based on the portfolio, if we assume dividends are received continuously and the risk - free rate of interest is 4.6028% pa effective.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Assume the risk-free rate is 2.5% and the market risk premium is 8.0%. The beta of GE is 1.10. The dividend forecast for the next four years is as follows: 2017: $1.04 2018: $1.22 2019: $1.41 2020: $1.60 Using the dividend payout ratio (53%) and Return on Equity (19.5%), what is closest to the intrinsic value of GE stock using the dividend discount model? Question 9 options: a) $53.40 b) $140.00 c) $97.98 d) $75.83
Suppose a stock is currently (time t = 0) worth 100. Further, suppose the one year annually compounded interest rate is 2%, and the two year annually compounded rate is 3%. Find the following:a) The forward price for a forward contract on the stock with maturity year T1 = 1. b) The forward price for a forward contract on the stock with maturity year T2 = 2.c) The forward price for a forward contract with maturity T1 = 1 on a ZCB with maturity T2 = 2.d) The forward price for a forward contract with maturity T1 = 1 on a forward contract on the stock with maturity T2 = 2 and delivery price K = 101.
Suppose the price of a stock is $85 and the continuously compounded interest rate is 6.25%. If the price for a 12-month forward contract on the stock is $89, what is the continuous dividend yield on the stock?
The market price of a security is $50. Its expected rate of return is 14%. The risk-free rate is 6%, and the market risk premium is 8.5%. What will be the market price of the security if its correlation coefficient with the market portfolio doubles (and all other variables remain unchanged)? Assume that the stock is expected to pay a constant dividend in perpetuity.
Assume the one period binomial model with initial share price £400, up and down factors u = 1.25, d = 0.9 and interest compounded at nominal rate (per time period) of 7%. Consider an option with payoff (S(0) + S(1))/2. The replicating portfolio for this option at time 0 will have shares and pounds in a bank. State your answers to three significant figures.
If the T Bill rate is 1.1% and the market risk premium is 10.8%, what is the CAPM-implied expected return on a portfolio invested 50% in the risk-free asset and 50% in the market?Enter your answer as a percentage rounded to 2 decimal places.
You observe that the settlement price of a one-year futures contract for 1 share of a dividend paying stock is currently at $52. The current stock price is $50 and the risk-free interest rate is 10% p.a. (compounded annually). It is also known that the dividend yield on the stock is 4% p.a. (compounded annually). Set up a strategy to realize an arbitrage profit today and show the initial and terminal cash flows from each position taken in the strategy. Assume that investors can short-sell or buy the stock on margin and that they can borrow and lend at the risk-free rate. Thank you!
suppose that you enter into a six-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 12% per annum. what is the forward price? a) $30.89 b) $31.86 c) $34.56 d) $32.15
The current price of a non- dividend paying stock is $38.52. Use a two-step tree to value a European call option on the stock with a strike price $32.3 that expires in 12 months. The risk free rate is 9.9% per annum, and the volatility is 28.1 % . What is the option price?
Sha is expected to pay a dividend of 1.00 at the end of the year. The market's risk free rate is 5.6%; market risk premium is 5%; beta is 1.48; and growth rate is 5%. What would be the stock's price using DDM approach?
Suppose XYZ stock pays no dividends and has a current price of $50. The forward price for delivery in 1 year is $55. Suppose the 1-year eective annual interest rate is 10%. (a) Graph the payo and prot diagrams for a forward contract on XYZ stock with a forward price of $55. (b) Is there any advantage to investing in the stock or the forward contract? Why? (c) Suppose XYZ paid a dividend of $2 per year and everything else stayed the same. Now is there any advantage to investing in the stock or the forward contract? Why?
The required rate of return on the Cosmos Corporation's common stock is 10%, the current real rate of return in the market is 1%, and the inflation rate is 3%. In this case, the risk premium associated with Cosmos stock is

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