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!
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!