On January 1, 2022, you are holding 10,000 shares of firm ABC Inc., which are trading at $50 per share (S0 = 50). ABC Inc. has announced that it will be paying a one-time dividend of I = $2 per share in 6 months, on July 1, 2022. The term structure of risk-free interest rates is flat and equal to 2% (continuous compounding). In order to hedge yourself against market risk, and to lock in the sales price of the shares in 1 year, you decide to enter into a forward contract on 10,000 shares of ABC Incs stock, with a delivery in a year.

(a) Do you need to take a long or a short position in the forward contract? Explain. [5 points]

(b) What is a fair delivery price of such a forward contract? [10 points]