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Value of the forward contract: An investor would like to buy a one-year forward contract on a dividend-paying stock. The stock will pay a $1.75/share
Value of the forward contract: An investor would like to buy a one-year forward contract on a dividend-paying stock. The stock will pay a $1.75/share dividend in 50 days and another $2.00/share dividend in 140 days. The stock is currently trading at $45 and the riskfree rate is 10%.
a) What is the fair forward price?
b) After 60 days, the stock price increases to $48. What is the current value of the forward contract to the investor?
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