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3 years ago

A single stock futures contract on a nondividend-paying stock with current price $180 has a maturity of one year.

Business

1 answer:

guajiro [1.7K]3 years ago

5 0

Answer:

a. $187.20.

b. $202.48.

c. $217.43.

Explanation:

Please find the below for detailed explanations and calculations:

We have the formula for determining the future price of the non-dividend-paying stock as below:

Future price = Spot price x (1+ annual risk free rate )n; which n = number of year(s) to maturity.

Thus, apply the general formula above, we have the below calculations:

a. Future price = 180 x (1+4%)^1 = $187.20;

b. Future price = 180 x ( 1+4%)^3 = $202.48;

c. Future price = 180 x (1+6.5%)^3 = $217.43.

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