A stock 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 a)...

a The present value of the income from the security ...

A stock is expected to pay a dividend of $1 per share in two months and in

Question:

A stock is expected to pay a 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 for all maturities. An investor has just taken a short position in a six-month forward contract on the stock.
a) What are the forward price and the initial value of the forward contract?
b) 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? Compounding
Compounding is the process in which an asset's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time. This growth, calculated using exponential functions, occurs because the investment will... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...