Question 6 (of 8) futures contract on a non-dividend-paying stock with current p

Question

Question 6 (of 8) futures contract on a non-dividend-paying stock with current price $280 has a maturity of 1 year. If the Toll rate is4%, what should the futures price be? Round your answer to 2 decimal places. Omit the "$ signs in your response.) Fuhures price b. What should the futures price be if the maturity of the contract is 7 years? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" signs in your response.) Futures price not round intermediate calculations. Round your answer to 2 decimal places. Omit the "S" signs c. What should tefutures pice be ifthe interest rate is 7%ard the maturity of the contract is 7 years? (Do in your response esc FI F2 F3 F4 F5 F6

Explanation / Answer

a. Future price = current stock price ( 1 + risk free rate )^n

where, S = current stock price

n= number of years

= 280 ( 1.04)

=$291.2

b.$ 280 ( 1.04 )^ 7

= $368.46

c. 280 *(1.07)^7

= $449.62

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