A 9-month short position of a forward contract on a stock isentered into today, when the stock price is $60. The stock hasexpected dividends of $1.0 in 2 months, $2.0 in 5 months, and $2.0in 7 months respectively. The risk-free interest rate is 3.0% perannum with continuous compounding.
(a) What is the forward price today?
(b) What is the initial value of the forward contract today?
(c) 3 months later, the price of the stock decreases to $55 andthe risk-free interest rate remains the same. What are the forwardprice and the value of the forward position then?
Question 3
A 9-month short position of a forward contract on a stock isentered into today, when the stock price is $60. The stock hasexpected dividends of $1.0 in 2 months, $2.0 in 5 months, and $2.0in 7 months respectively. The risk-free interest rate is 3.0% perannum with continuous compounding.
(a) What is the forward price today?
(b) What is the initial value of the forward contract today?
(c) 3 months later, the price of the stock decreases to $55and the risk-free interest rate remains the same. What are theforward price and the value of the forward position then?
?no more information.?
