Continuous dividend-continuously compounded risk-free rate

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Reference no: EM13978983

Suppose a company’s $50 stock pays an 8% continuous dividend and the continuously compounded risk-free rate is 6%. Calculate the following:

a. the price of a prepaid forward contract that expires 1 year from now

b. the price of a forward contract that expires 1 year from now

(Hint: You will need a scientific calculator.)

Reference no: EM13978983

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