Question
A stock is expected to pay a dividend of $2 per share in two months and in five months. The stock price is $40 and
A stock is expected to pay a dividend of $2 per share in two months and in five months. The stock price is $40 and the risk-free rate of interest is 8% per annum with continuous compounding for all maturities.
An investor has just taken a short position in a six-month forward contract on the stock. What are the forward price and the initial value of the forward contract?
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Fundamentals of Financial Accounting
Authors: Fred Phillips, Robert Libby, Patricia Libby, Brandy Mackintosh
4th Canadian edition
978-1259103292
