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Suppose the stock in question 2 pays a dividend of $0.225/share per quarter. You expect the...

Suppose the stock in question 2 pays a dividend of $0.225/share per quarter. You expect the dividend to be paid 3, 6, 9, and 12 months into the life of the forward. The appropriate risk-free rate for all maturities up to 1-year is 2.02%, compounded annually. What is the price of the forward?

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Answer #1

Price = Dividends/ ke - g

P = 0.225*4/ 2.02

P = 44.55.

Therefore, Price of the forward is $ 44.55.

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