A firm is expected to pay dividend of $1 per share in 2 months, $1.20 per share

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Question:

A firm is expected to pay dividend of $1 per share in 2 months, $1.20 per share in 5 months, $1.40 per share in 8 months, and $1.60 per share in 11 months. The current price of the stock is $80 per share, and the risk-free rate of interest is constant at 4% per annum compounded continuously. A trader has just taken a short position in a 6-month forward contract on the stock.

Question: Suppose that four months have passed, and now, the stock price is $75 per share, with the risk-free rate of interest is still 4% per annum compounded continuously. Clearly state whether it will be a gain, or a loss, and the amount of the gain, or loss, if the trader closes her forward position today.

Provide your answer (up to 3 decimal points) in the box provided below. You may want to show your working so that partial marks can be allocated for incorrect answer.