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Calculate the forward price and the initial value

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Reference no: EM133004508

An investor has just taken a short position in a 6-month forward contract on a dividend  paying stock. The stock is currently priced at $60 and is expected to pay a dividend of  $1.5 per share in 2 months and in 5 months. Assuming the term structure of interest rates is flat and a continuously compounded risk-free rate of interest is 8% per annum for all maturities, you are required to:

Problem 1: Calculate the forward price and the initial value of the forward contract.

Reference no: EM133004508

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