Question: 2. One entered into a two-year forward contract on a stock when the stock price wa $100 and the interest rate was 10%. At that

2. One entered into a two-year forward contract on a stock when the stock price wa $100 and the interest rate was 10%. At that moment, it was known that the stock will pay a dividend of $20 in one year. All the interest rates are compounded continuously per annum. (a) Find the delivery price of the forward contract and determine the initial value for the long position. 18 marks] (b) When half year was left to the maturity, the stock price became $90 and the interest rate became 12%. Find the value of the forward contract for the short position at that time. 17 marks

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