7. Suppose XYZ stock pays no dividends and has a current price of \($50\). The forward price for delivery in 1 year is \($55\). Suppose the 1-year effective annual interest rate is 10%.

a. Graph the payoff and profit diagrams for a forward contract on XYZ stock with a forward price of $55.

b. Is there any advantage to investing in the stock or the forward contract? Why?

c. Suppose XYZ paid a dividend of \($2\) per year and everything else stayed the same. Now is there any advantage to investing in the stock or the forward contract? Why?