The current price of a share of a certain stock is 77. The stock is expected to pay a dividend of 4.5 in 3 months, but no other dividends are expected within the next year. The annual effective risk-free rate of interest is 3.9%. Find the one-year forward price of the stock. A. 75.37 B. 78.39 C. 76.88 D. 79.89 E. 73.86 Please show your work
Added by Jennifer C.
Step 1
We can use the formula: PV = Dividend / (1 + r)^t where PV is the present value, Dividend is the expected dividend payment, r is the annual effective interest rate, and t is the time in years. Plugging in the values, we get: PV = 4.5 / (1 + 0.039/4)^(3/12) = Show more…
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