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Business, 07.11.2019 03:31 moutchyjoseph

Astock is expected to pay a dividend of $1 per share in two months and in five months. the stock price is $50, and the risk-free rate of interest is 8% per annum with continuous compounding for all maturities. an investor has just taken a short position in a six-month forward contract on the stock. what are the forward price and the initial value of the forward contract? three months later, the price of the stock is $48 and the risk-free rate of interest is still 8% per annum. what are the forward price and the value of the short position in the forward contract?

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