For t 0, let S(t) be the time-t price of Stock ABC. You are given: (i)

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For t ≥ 0, let S(t) be the time-t price of Stock ABC. You are given:

(i) S(0) = 100

(ii) At time 0.5, a cash dividend of $10 per share will be paid.

(iii) From time 0.75 to time 1, dividends are paid continuously at a rate proportional to its price. The dividend yield is 10%.

(iv) The continuously compounded risk-free interest rate is 8%.

Calculate the price of a one-year prepaid forward contract on stock ABC.

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Question Posted: Nov 22, 2023 08:17 AM

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For t 0, let S(t) be the time-t price of Stock ABC. You are given: (i)

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Derivative Pricing

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