1. This is a problem that has TWO questions. Therefore, please choose TWO answers (one choice for each question) to get full credit for this questions, otherwise you will only get partial points.

   You have entered into a SHORT forward contract on a dividend-paying stock some time ago, and this will expire in 2 years. It has a delivery price of $40 and the current stock price is $45. It provides a fixed dividend yield of 5% with annual compounding. If the risk-free rate is 8% per annum with continuous compounding for all maturities, answer the following question:

   1) What should be the (new) 2-year forward price for no arbitrage opportunity?

   2) What is the value of this SHORT forward contract?

   *use at least 6 decimal places

   		1) (new) 2-YEAR FORWARD PRICE = 48.50
   		1) (new) 2-YEAR FORWARD PRICE = 47.90
   		1) (new) 2-YEAR FORWARD PRICE = 40.90
   		1) (new) 2-YEAR FORWARD PRICE = 45.50
   		2) VALUE OF THE SHORT FORWARD CONTRACT = -8.90
   		2) VALUE OF THE SHORT FORWARD CONTRACT = 8.90
   		2) VALUE OF THE SHORT FORWARD CONTRACT = -6.73
   		2) VALUE OF THE SHORT FORWARD CONTRACT = +6.73