Investor takes long position

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Investor takes a long position in a six-month forward contract on a stock and the stock price is 50$ and pays a dividend of 3 in three months. The interest rate is constant 10% per annum, continuously compounding. Markets are arbitrage free. Suppose that the stock price becomes 45 in 4 months and the investor decides to close out the long position at that time by entering new forward contract. What are the cash flows in four and six months?

Reference no: EM133272512

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