a) A one-year long forward contract on a market traded portfolio (e.g. an ETF) is entered into when the portfolio unit price is $15 and the risk-free rate of interest is 10% per annum with continuous compounding. The dividend yield of the portfolio is 3% p.a. continuous compounding. (5 marks)

i) What are the forward price and the initial value of the forward contract?

ii) Six months later, the portfolio unit price increases to $20.5 and the risk-free interest rate is still 10%. What are the forward price and the value of the forward contract?