Help with forward price question please

gumy7s

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Sep 26, 2009
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What is the 3-month forward price for a stock providing no income if the stock price is $50 and the interest rate is 2%? What is the forward price if the stock pays a 2% dividend yield (use continuous compounding). What is the forward price if the stock pays dividends with a current value of $1?

My answer to the bolded part is 50(1.02)^(1/4), which equals approximately $50.25. However, I'm confused about what to do when dividends are involved. Any help would be very much appreciated!
 
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