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Lets consider an one-year forward contract on a certain dividend-paying stock. The current price of the stock is $100, and the stock is known to
Lets consider an one-year forward contract on a certain dividend-paying stock. The current price of the stock is $100, and the stock is known to pay dividend twice in three and nine months from now. Each time, the dividend amount will be the 1% of the stock price at that time. Assume that risk-free interest rate is 4% per annum with quarterly compounding. Then, in theory, the one-year forward price on the stock should be $__________.?
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