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A stock is expected to pay a dividend of $0.70 per share in one month, in four months and in seven months. The stock price
A stock is expected to pay a dividend of $0.70 per share in one month, in four months and in seven months. The stock price is $30, and the risk-free rate of interest is 7% per annum with continuous compounding for all maturities. You have just taken a short position in an eight-month forward contract on the stock. Six months later, the price of the stock has become $34 and the risk-free rate of interest is still 7% per annum. What is the value your position six months later?
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