Forwards and Futures (60 Points)

Respond to the following questions:
1.Suppose a company’s $50 stock pays an 8% continuous dividend and the continuously compounded risk-free rate is 6%. Calculate the following:

a. the price of a prepaid forward contract that expires 1 year from now

b. the price of a forward contract that expires 1 year from now

(Hint: You will need a scientific calculator.)

2.Suppose the gold spot price is $1700/oz, the 1-year forward price is 1760.54, and the continuously compounded risk-free rate is 4%. Calculate the following:

a. the lease rate

b. the return on a cash-and-carry if gold cannot be loaned

c. the return on a cash-and-carry if gold is loaned and it earns the lease rate

(Hint: You will need a scientific calculator.)

3.Compute Macaulay and modi?ed durations for the following bonds:

a. a 5-year bond paying annual coupons of 3.322% and selling at par

b. an 8-year bond paying semiannual coupons with a coupon rate of 9% and a yield of 8%

c. a 10-year bond paying annual coupons of 5% with a price of $96 and a maturity value of $100

Why Choose US

6+ years experience on custom writing
80% Return Client
Urgent 2 Hrs Delivery
Your Privacy Guaranteed
Unlimited Free Revisions
find the cost of your paper
Is this question part of your assignment?
Place order
Posted on May 12, 2016Author TutorCategories Question, Questions