Problem:
Value of the forward contract: An investor would like to buy a one-year forward contract on a dividend-paying stock. The stock will pay a $1.75/share dividend in 50 days and another $2.00/share dividend in 140 days. The stock is currently trading at $45 and the risk free rate is 10%.
Answer the following questions:
Question 1: What is the fair forward price?
Question 2: After 60 days, the stock price increases to $48. What is the current value of the forward contract to the investor?
Describe in detail and describe all workings out.