Question: How will I do these exercisies. I'm a bit confused 3.9. A stock is expected to pay a dividend of $1 per share in 2

How will I do these exercisies. I'm a bit confused 3.9. A stock is expected to pay a dividend of $1 per

3.9. A stock is expected to pay a dividend of $1 per share in 2 months and in 5 months. The stock price is $50, and the risk-free rate of interest is 8% per annum (with continuous compounding). An investor has just taken a short position in a 6-month forward contract on the stock. 1. What are the forward price and the initial value of the forward contract? 2. Three months later, the price of the stock is $48. What are the forward price and the value of the short position in the forward contract? 3.10. Suppose that you enter into a 6-month forward contract on a stock today, when the stock price is $15 and the risk-free interest rate (with continuous compounding) is 7% per annum. The stock pays dividend, namely, the average yield per annum on the stock in this 6 months is 3.2%. 1. Determine the forward price and the value of the forward contract! 2. What is the value of the position 2 months later if the stock price then turns out to be $20?

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