For a 10-month forward contract on a stock when the stock price is £40 with the risk-free rate of interest continuously compounded is 6% per annum for all maturities and the dividends of £0.60 per share expected after 3 months, 6 months and 9 months:

Calculate the price of the 10-month forward contract. Why does the forward contract price must be exactly equal to the calculated number in regards to the assumptions of arbitrage opportunity?

Answer rating: 100% (QA)

To calculate the price of the 10month forward contract we can use the following formula F S er q T w... View the full answer