The forward contract's initial value is 50.01 and its forward price is 1.9540.
<h3>Forward Contract: What is it?</h3>A forward contract is a sort of derivative in which the underlying asset is sold at a defined price and at a later time. The contract includes the writer and the buyer as the two parties. Interest, currency exchange rates, metal, stocks, etc. are examples of the underlying asset in a derivative contract.
Given:
Dividend = $1 per share
Stock price = $50
Risk-free rate = 8% per annum
Present value of income from security= ( dividend X ) + (dividend X
)
= ( 1 X ) + (1 X
)
= (1 X 0.98676) + (1 x 0.96722)
= 0.98676 + 0.96722
= 1.9540
Forward Price = (stock price - present value of income from security) X
= ( 50- 1.9540) X
= 48.046 X 1.041
= 50.01
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