An asset is expected to pay a dividend of 1% of the stock price. The stock price is $100, and the risk-free rate of interest is 9% per annum with continuous compounding. An investor has just taken a short position in a 9-month forward contract on the stock.

(a) What are the forward price and the initial value of the forward contract?

(b) Three months later, the price of the stock is $108 and the risk-free rate of interest is still 8% per annum. What are the forward price and the value of the short position in the forward contract?

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