Suppose stock A, which pays dividend of $2 in 4 months, is priced at $20. Bonds with

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Question:

Suppose stock A, which pays dividend of $2 in 4 months, is priced at $20. Bonds with face values of $100 maturing in 4 months and 8 months are trading at $99.02 and $98.05.

a. What is the 8-month forward price of the stock?

b. After 5 months, the price of this stock is $23. Bonds with face values of $100 maturing in 3 months is priced at $99.26. What is the current value of this 8-month forward contract in part (a)?