A $50 stock pays a $1 dividend every 3 months, with the first dividend coming 3 months

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A $50 stock pays a $1 dividend every 3 months, with the first dividend coming 3 months from today. The continuously compounded risk-free rate is 6%.
a. What is the price of a prepaid forward contract that expires 1 year from today, immediately after the fourth-quarter dividend?
b.
What is the price of a forward contract that expires at the same time? Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Derivatives Markets

ISBN: 978-0321543080

4th edition

Authors: Rober L. Macdonald

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