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On June 15, you took a long forward contract (delivery on December 15) on a dividend-paying...

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Finance

On June 15, you took a long forward contract (delivery onDecember 15) on a dividend-paying stock when the stock price was$30 and the risk-free interest rate (with discrete compounding) is12% per annum. The amount of the dividends were known as $0.75 onAug 15, and Nov 15. It is now September 15 and the current stockprice and the risk-free interest rate are, respectively, $31 and10%. What is the value of your long forward position now? Assumethe forward contract prices are arbitrage free prices.

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Step 1 Calculating Forward Price on June 1 On June 15 Spot price S0 30 Risk free rate r 12 pa Dividend on Aug 15 D1 075 time to first dividend t1 212 and dividend on Nov 15    See Answer
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