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viva [34]
4 years ago
6

HAW, Inc. plans to pay a $1.10 dividend per share in 3 months and a $1.15 dividend in 6 months. HAW's share price today is $45.6

0 and the continuously compounded quarterly interest rate is 2.1%. What is the price of a forward contract, which expires immediately after the second dividend?
Business
1 answer:
Anestetic [448]4 years ago
8 0

Answer:

$45.28

Explanation:

The computation of price of a forward contract is shown below:-

      Cash flows      Future Value Amount               Amount

A     $45.60       $45.6 × exponential(0.021 × 2)    $47.55599

B     $1.10            $1.10 × exponential(0.021 × 1)      $1.123344

C     $1.15            $1.15 × exponential(0.021 × 0)     $1.15

So, The value of forwards contract = Amount of A - Amount of B - Amount of C

= $47.55 - $1.12334 - $1.15

= $45.28

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the Consumer Price Index is rising

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