A stock will for sure pay a dividend of $2 per share in two months...
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Finance
A stock will for sure pay a dividend of $2 per share in two months and in five months. The stock price is $100, and the risk-free rate is 4% per annum. You have just taken a long position in a 6-month forward contract on the stock.
(a) What are the no-arbitrage forward price and the corresponding initial value of the forward contract to you today?
(b) Three months later, the price of the stock is $90 and the risk-free rate is still 4% per annum. What is the no-arbitrage forward price?
(c) Based on the information of (b), what would be the value of the forward contract to you and your counterparty respectively at that time?
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