Question: A stock is announced to pay $1.20 per share in one month and in also expected to pay $1.25 in 5 four months. The stock price is $90, and the risk-free rate of interest is 4% per annum with continuous compounding for this problem. Suppose you just took a short position in a six-month forward contract on the stock.

i.What are the Forward Price and the initial value of the forward contract?

ii. Three months later, the price of the stock is $98 and the risk-free interest rate is still 4%. What is the forward price at this point?

iii. What is the value of the short position in the forward contract you signed three months ago?