Question
A stock price is $82 and the risk-free rate for all maturities is 5% with continuous compounding. The stock is expected to pay a dividend
A stock price is $82 and the risk-free rate for all maturities is 5% with continuous compounding. The stock is expected to pay a dividend of $6.5 per share in one month, $6.8 per share in four months, and $7.2 per share in seven months. Linda has just taken a long position in a nine-month forward contract on the stock. Three months later, the price of the stock is $94 and the risk-free rate of interest is still 5% per annum. What is the value of Lindas position in the forward contract? (Please do not round intermediate calculations.)
A. | $18.4 | |
B. | $17.5 | |
C. | $17.2 | |
D. | $18.8 |
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