1) A 1-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $40 and the risk-free rate of interest is 5% per annum with continuous compounding. (a) What are the forward price and the initial value of the forward contract? (b) Six months later, the price of the stock is $45 and the risk-free interest rate is still 5%. What are the forward price and the value of the forward contract? (Hull 5.17)

2) Repeat the problem 1) if the stock pays cash dividend of $3 at the end of month 6 (i.e., t = 0.5) and everything else are the same.