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Determine the forward price for a contract written

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Reference no: EM133254266

Consider a stock whose price on January 1, 2023 is $120 and which will pay a dividend of $1 on on July 1, 2023 and a dividend of $2 on October 1, 2023. Assume the ex-dividend date is the payment date. The interest rate is 12%.

(a) Determine the forward price for a contract written on January 1, 2023 with a delivery date of November 1, 2023.

(b) Determine how much the long side of a forward contract written on January 1, 2023 would be worth October 1, 2023 right after the dividend is paid if the stock price is $100.

Reference no: EM133254266

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