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  3. consider a 10-month forward contract on a stock wh

Consider a 10-month forward contract on a stock when the stock is £50. Assume that the...

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Finance

  1. Consider a 10-month forward contract on a stock when the stockis £50. Assume that the risk-free rate of interest continuouslycompounded is 8% per annum for all maturities and that thedividends of £0.75 per share are expected after 3 months, 6 monthsand 9 months.
  1. What is the price of the 10-month forward contract?
  1. Considering the arguments of arbitrage opportunity explain indetail why the forward contract price must be exactly equal to theresult of (a) above.

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