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Consider a 10-month forward contract on a stock when the stock is £50. Assume that the...

  1. Consider a 10-month forward contract on a stock when the stock is £50. Assume that the risk-free rate of interest continuously compounded is 8% per annum for all maturities and that the dividends of £0.75 per share are expected after 3 months, 6 months and 9 months.
  1. What is the price of the 10-month forward contract?
  1. Considering the arguments of arbitrage opportunity explain in detail why the forward contract price must be exactly equal to the result of (a) above.

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Expert Solution

For better under standing given the excel formulas used

jeff jeffy answered 6 months ago
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