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March 15th, 2012, 06:52 PM  #1 
Newbie Joined: Mar 2012 Posts: 1 Thanks: 0  Forward Futures Questions
Could anyone please help with solutions to the below. Thanks. Throughout this question assume that the oneyear riskfree interest rate is 6%. In each of the parts, state any additional assumptions needed to solve the problem. a. ABC stock has current price of £5900 and annual dividend yield of 2%. Find the noarbitrage price of a 3month forward contract on ABC stock. b. There is a temporary, unexpected glut of wheat on world markets due to an unusually large harvest. Storage facilities are overfull and wheat users have excess inventories. Storage costs are £10 per ton per annum. The spot price of wheat is £600 per ton. What is the futures price of wheat for delivery in six months’ time? c. Reconsider the situation in part (b). Suppose a desperate buyer o?ers to pay you £700 at delivery if you can guarantee delivery of one ton of wheat in six months’ time. How can you make a riskless profit from this desperate buyer? 

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