A $ 60 stock pays $ 3.5 every 3 months, with the first dividend coming 3 months from today. The continously compounded risk-free rate is 3 %.
a) What is the price of a prepaid forward contract that expires 1 year from today, immediately after the fourth-quarter dividend?
$
?
b) What is the price of a forward contract that expires at the same time?
$
?
You can earn partial credit on this problem.