Business, 06.12.2019 01:31 karenaustin5

The spot price of an investment asset is $25 and the risk-free rate is 8%, 8.5% and 9.5% for one-year-, two-year- and three-year-maturity, respectively. the asset provides an income of $4 at the end of the first year and at the end of the second year. note: all interest rates are quoted with continuous compounding in this problem1) what is the three-year forward price for no arbitrage opportunity? 2) if the 3-year forward price in the market is quoted as $21, what arbitrage opportunities does this create? 1) theoretical forward price = $35.841) theoretical forward price = $20.841) theoretical forward price = $23.851) theoretical forward price = $29.852) long forward contract, and short the underlying asset in the spot market2) short forward contract, and short the underlying asset in the spot market2) long forward contract, and buy the underlying asset in the spot market2) short forward contract, and buy the underlying asset in the spot marke

Answers: 3

Show answers

Another question on Business

Business, 21.06.2019 16:30

Aland development company purchases several acres of land adjacent to a wildlife reserve. it plans to build a new community, complete with shops and schools. green sands, a local environmental group, complains that the company's proposed building methods will disrupt the area's ecological balance. the company wants to respect the local ecology but also wants to build its development. the company decides to schedule a meeting with green sands's representatives to make choices about the property that are agreeable to both sides. which strategy would be most effective in this situation?

Answers: 2

Answer

Business, 22.06.2019 00:50

Hanna intends to give her granddaughter, melodee, her antique hat pin. this heirloom has been kept under lock and key in the wall vault in the library of hanna's house in virginia. the hat pin is currently the only item in the vault. when hanna is visiting melodee in connecticut, hanna gives melodee the only key to the vault. melodee is grateful for the present and excitedly accepts. in this situation has there been a completed gift?

Answers: 3

Answer

Business, 22.06.2019 01:30

The strength of the economy depends on the balance pf production and consumption of goods and consumption of goods and services

Answers: 1

Answer

Business, 22.06.2019 06:40

Burke enterprises is considering a machine costing $30 billion that will result in initial after-tax cash savings of $3.7 billion at the end of the first year, and these savings will grow at a rate of 2 percent per year for 11 years. after 11 years, the company can sell the parts for $5 billion. burke has a target debt/equity ratio of 1.2, a beta of 1.79. you estimate that the return on the market is 7.5% and t-bills are currently yielding 2.5%. burke has two issuances of bonds outstanding. the first has 200,000 bonds trading at 98% of par, with coupons of 5%, face of $1000, and maturity of 5 years. the second has 500,000 bonds trading at par, with coupons of 7.5%, face of $1000, and maturity of 12 years. kate, the ceo, usually applies an adjustment factor to the discount rate of +2 for such highly innovative projects. should the company take on the project?

Answers: 1

Answer

You know the right answer?

The spot price of an investment asset is $25 and the risk-free rate is 8%, 8.5% and 9.5% for one-yea...

Questions