Problem:
For the following questions assume the risk free rate of return is 2.50%. Your company imports large quantities of oil. On January 1st 2011 the spot price of oil is $70. You are concerned that recent events will drive the price of oil higher in 90 days time when you will need to purchase a large quantity. Under these circumstances calculate the price of a forward contract. In 90 days time the spot price of oil is $125; calculate the profit or loss of your forward position. What is the 10 month forward price of a dividend security based on the following information:
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Current price
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$110.00
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Quarterly dividend
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$1.00
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Dividend payment dates:
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3M, 6M, 9M
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Additional Information:
This question is basically belongs to the Finance as well as it discusses about computation of forward price of a dividend security. The calculation has been given in the solution.