question 6

a stock is expected to pay a dividend of $1 per share in two months and five months. the stock price is $50 and the risk free rate of interest is maturities. an investor has just taken a short position in a six 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 $48 and the risk free rate of interest is still 8% per annum . what is the forward price of the short positionin the forward contract?