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  3. 2. we expect a stock to pay a dividend of $2 per s

2. We expect a stock to pay a dividend of $2 per share in 2...

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Finance

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2. We expect a stock to pay a dividend of $2 per share in 2 months and in 5 months. The current stock price is $100. The annual risk-free rate of interest is 8% with monthly compounding for all maturities. An investor has just taken a short position in a 6-month forward contract on the stock. a) What are the forward price and the initial value of the forward contract? b) Four months later, the price of the stock is $92 and the risk-free rate interest is 7.5% per annum. What are the forward price and the value of the short position in the forward contract

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