Forward Pricing with Known IncomeA stock is currently priced…
Forward Pricing with Known IncomeA stock is currently priced at $120 and will pay a $3 dividend in 2 months and another $3 dividend in 5 months. The risk-free rate is 5% per annum (continuously compounded).(a) Calculate the 6-month forward price.(b) If the quoted 6-month forward price is $116, describe precisely how an arbitrageur would profit and calculate the profit per share.