A forward contract allowing to buy a stock on 05/01/2021 was entered on 02/01/2021 at a forward price of $100. the stock pays a dividend of $3 per share on 03/01/2021. Assume that on 04/01/2021 the stock price is $110. Find the values of the original forward contract on 04/01/2021 and on 05/01/2021. Assume the annual risk-free rate is 6% with monthly compounding. 

Answer rating: 100% (QA)

To calculate the value of the forward contract on 04012021 and on 05012021 we need to consider the i... View the full answer