QUESTION 2 [7 marks] A short forward contract with exactly 360 days to maturity on a stock is entered into when the stock price is $9.00 and the risk-free interest rate is 15.00% per annum with continuous compounding for all maturities. The stock is certain to pay dividends per share of 20 cents in 60 days-time and 30 cents in 270 days-time. Assume one year is 365 days. Required: a. What are the forward price and the initial value of the forward contract? (3 marks) QUESTION 2 continued: b. Exactly 180 days later the stock price is $8.00 and the risk-free interest rate is 12.50% per annum (continuously compounded) for all maturities. What are the forward price and the value of the short position in the forward contract? (4 marks) QUESTION 2 [7 marks] A short forward contract with exactly 360 days to maturity on a stock is entered into when the stock price is $9.00 and the risk-free interest rate is 15.00% per annum with continuous compounding for all maturities. The stock is certain to pay dividends per share of 20 cents in 60 days-time and 30 cents in 270 days-time. Assume one year is 365 days. Required: a. What are the forward price and the initial value of the forward contract? (3 marks) QUESTION 2 continued: b. Exactly 180 days later the stock price is $8.00 and the risk-free interest rate is 12.50% per annum (continuously compounded) for all maturities. What are the forward price and the value of the short position in the forward contract? (4 marks)