Question: QUESTION 7 A stock is expected to pay a dividend of $1 per share in four months and in nine months. The stock price is

QUESTION 7 A stock is expected to pay a dividend of $1 per share in four months and in nine months. The stock price is $50, and the risk free rate of interest is 8% per annum with continuous compounding for all maturities. An investor has just taken a short position in a twieve month forward contract on the stock a. What are the forward price and the initial value of the forward contract? b. Six months later, the price of the stock is $48 and the risk free rate of interest is still 8% per annum. What are the forward price and the value of the short position in the forward contract? M.E.T. 18 TTTT Paragraph Aral %DOQ O S Mashup 3(1201) TT. Word: Pacho

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