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A stock is expected to pay a dividend of $1 per share in 2 months. An investor purchased a forward contract on the stock at

A stock is expected to pay a dividend of $1 per share in 2 months. An investor purchased a forward contract on the stock at a forward price of $50 some time ago. The contract now has 3 months to its delivery date. The stock is currently trading at $55 and the risk free rate is 4% on a continuously compounded basis. Consider the following statements.

I. The price of a forward contract on the stock with 3 months to the delivery date is $54.55

II. The value of the investors forward position is $5.50 Which of the following is correct? (No excel pls)

a. Statement I is incorrect, Statement II is correct.

b. Both statements are correct.

c. Both statements are incorrect.

d. Statement I is correct, Statement II is incorrect.

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