Question
You are interested in the IFID-stock that pays out dividends of 5 $ in 5 months and 5 $ in 10 months time. The stock
You are interested in the IFID-stock that pays out dividends of 5 $ in 5 months and 5 $ in 10 months time. The stock price is 81 $, and the risk-free rate of interest is 15% per annum with continuous compounding for all maturities. You decide to take a long position in a 12 months forward contract on the IFID stock. Four months later, the price of the stock has increased to 88 $. The interest rate is still 15% per annum with continuous compounding for all maturities. What is the value of your long position in the forward contract?
the other question got this to 84.53.
Calculation of the first dividend shows 5*e^(-0,15*0,0833) where 0,0833 is the same as 10/12. But the calculation for the second dividend shows a number of 0,5. But in the question it says the dividend is paid out in 5 months, which is 5/12 = 0,41666? Could you pleaes explain this and also with the possible right answer?
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