A stock is expected to pay a dividend of $1.50 per share in three months and in six months. The stock price is currently $45and the risk-free rate is 6% per annum with continuous compounding for all maturities. An investor has just taken a short position in seven-month forward contract on the stock.

#1) What is the forward price for no arbitrage opportunity?

#2) What is the initial value of the forward contract?

4 months later. Now, the price of the stock is $50 and the risk-free rate is still 6% per annum with continuous compounding.

#3) What is the new forward price for no arbitrage opportunity?

#4) and what is the value of the short position in the forward contract?

		#1) forward price initially = $44.55
		#1) forward price initially = $43.57
		#1) forward price initially = $46.52
		#2) initial value of the contract = $0
		#2) initial value of the contract =cannot determine without further information
		#2) initial value of the contract = -$1.52
		#3) forward price 4 months later = $52.21
		#3) forward price 4 months later = $48.85
		#3) forward price 4 months later = $49.25
		#3) forward price 4 months later = $50.75
		#4) value of the short forward contract 4 months later = $0
		#4) value of the short forward contract 4 months later = -$5.60
		#4) value of the short forward contract 4 months later = $5.60
		#4) value of the short forward contract 4 months later = cannot determine without further information