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Unformatted text preview: t = stock price at t I t = value at time t of cashﬂows to be received over the life of the contract . In this case we want F = F (0 , 1) = 100 e . 1 × 14 X i =1 1 . 25 e . 1(1t i ) where t i = 0 . 25 i , so F = 105 . 33. (b) We want F ( t,T ) with t = 0 . 5, T = 1. We have that S t = 105, and I t = 2 X i =1 1 . 25 e. 1 × . 25 i = 1 . 25 e. 1 × . 25 + 1 . 25 e. 25 × . 5 = 2 . 408 because a dividend of $1.25 will be received at time 0.75 and at time 1. Therefore F (0 . 5 , 1) = (1052 . 408) × e . 1 × . 5 = 107 . 85 . 1...
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This note was uploaded on 03/17/2012 for the course ACTSC 446 taught by Professor Adam during the Spring '09 term at Waterloo.
 Spring '09
 Adam
 Dividends

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