Explain what happens when an investor shorts a certain, Finance Basics

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Explain what happens when an investor shorts a certain

1. Explain what happens when an investor shorts a certain share.

2. What is the difference between the forward price and the value of a forward contract?

3. Suppose that you enter into a 6-month forward contract on a non-dividend-paying stock when the stock price is $30 and the risk-free interest rate (with continuous compounding) is 12% per annum. What is the forward price?

4. A stock index currently stands at 350. The risk-free interest rate is 8% per annum (with continuous compounding) and the dividend yield on the index is 4% per annum. What should the futures price for a 4-month contract be?

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