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MediumFinance
Forward Price with a Dividend Yield
J.P. MorganCitadel
A stock trades at $100 with a continuous dividend yield of 2%. With a 5% continuously-compounded risk-free rate, what is the 1-year forward price (in dollars)?
Approach
F = S·e^((r − q)T).
The dividend yield offsets the financing cost.
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