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b. X is the price of a 3 years prepaid forward contract on Stock P. Y is the price of a 1.5 years prepaid forward
b. X is the price of a 3 years prepaid forward contract on Stock P. Y is the price of a 1.5 years prepaid forward contract on Stock Q. Stock P is expected to pay a quarterly dividend of $1.15 for 3 years and each dividend will be 1% higher than the previous dividend; while Stock Q will pay a 4% continuous dividend. Given the current spot price for Stock P is $130 and Stock Q is $120. Assuming the continuously compounded risk-free rate of interest is 4%. Find Y - X. (6 marks)
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