Six months ago a company entered in a one-year forward contract to buy the stock. At the time, the one-year forward price was USD 88. The stock price is now USD 95 and the stock will pay a dividend of USD 3 at the end of forward contract. The continuously compounded risk free rate is 4% per year for all maturities, and there are no storage costs. Which of the following is closest to the value of the forward contract?
Six months ago a company entered in a one-year forward contract to buy the stock. At the time, the one-year forward price was USD 88. The stock price is now USD 95 and the stock will pay a dividend of USD 3 at the end of forward contract. The continuously compounded risk free rate is 4% per year for all maturities, and there are no storage costs. Which of the following is closest to the value of the forward contract? A.-$5.80; B.$5.80; C.-$8.74; D.$8.74