Jim Trent, CFA has been asked to price a three month forward contract on 10,000 shares of Global Industries stock. The stock is currently trading at $58 and will pay a dividend of $2 today. If the effective annual risk-free rate is 6 percent, what price should the forward contract have? Assume the stock price will change value after the dividend is paid. A) $56.85. B) $56.82. C) $58.85. D) $56.83.
(58-2)*1.06^(3/12) = 56.82 B
it is b i can’t do math
The answer is B apparently IMO this is a stupid question. We all know that he stock price would already reflect the dividend, but this answer begins with ‘subtract the dividend’.
True, but the question says “Assume the stock price will change value after the dividend is paid.”…