An equity manager owns Cisco stock, which is currently trading at $30/share. He plans to sell the
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An equity manager owns Cisco stock, which is currently trading at $30/share. He plans to sell the stock in 110 days to take advantage of the lower capital gains tax for stocks held at least 1 year, but is concerned about a possible price decline in the interim. He decides to take a short position in a 110-day forward contract on the stock when the risk free rate is 3%. The stock will pay a $0.60 per share dividend in 40 days and another $0.60 in 130 days. What is the value of the contract in 45 days, assuming the stock is trading at $24 and the risk free rate is still 3%?
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