Assignment 20

Assignment 20 - Comm 374 Assignment #4 Due on Wednesday...

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Comm 374 Assignment #4 Due on Wednesday April 6 th (last lecture) Assignment Instructions: Solutions must be typed and the work has to be done with your group. Each group should submit one hard copy of the assignment (electronic files through emails or floppy disc are not accepted). There is no need to post anything on the course Vista web page. On the first page be sure to include the course and section number, the name of each member as well as the group number (see Vista). Give me a printout at the end of the last lecture (April 6 th ) Question1: At the beginning of the year, the price of one share of a common stock of XYZ is $40. Assume that you can borrow and lend at 4% (EAR) at the foreseeable future. a) Calculate the forward price of a one year forward contract on one share of XYZ if XYZ does not pay any dividend b) Compute the forward price of a one year contract if it is known for sure that XYZ will pay out a dividend of $2 on September 30. c) Six month later, on June 30, the price of XYZ is $45 (interest rates have not changed). What is then the price of a new forward contract on 1 share of XYZ but with the same maturity date as the previous contract (i.e Dec 31)? Assume that the stock pays no dividend as in part (a) above. Question2: You will find below the characteristics and prices of some treasuries that have the same face value of $100: Bond 0: Zero coupon, maturity 2 years, price at date 0 is $92.46
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Assignment 20 - Comm 374 Assignment #4 Due on Wednesday...

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