forward price value

Q from april 2007
An investor entered into a long forward contract for a security 5 years ago and the contract is due to mature in 7 years’ time. The price of the security was £95 five years ago and is now £145. The risk-free rate of interest can be assumed to be 3% per annum throughout the 12 year period.
Assuming no arbitrage, calculate the value of the contract now if
(i) The security will pay dividends of £5 in two years’ time and £6 in four years’ time.
(ii) The security has paid and will continue to pay annually in arrear a dividend of 2% per annum of the market price of the security at the time of payment.


0 (95) ............ 5(145)................... 12

tell m sir

1) is value of forward contract give the future value? i.e it give value of 5 to 12 year period.

2) pls find attachment and explain me detail what actualy done in solution?.

 

value of a forward contract is not a future value, it's a current surplus/deficit value, i.e. value of the forward contract for this situation is surplus/deficit at point 5. that is what is solved in solution.

 

value

means it give the value at 5. m i correct?

can u give me email id hemant?

 

means, It'll give the surplus/deficit value at point of time.

r.act.hemant@gmail.com

 

sir can u plz help me with the sol of above stated question

according to me the ans should be
1) k(0) = (S(0)-I)*(1+i)^T = 95*1.03^12-5*1.03^2-6*1.03^4=123.389
k(5) = S(5)*(1+i)^(T-r) = 145*(1+i)^7=178.33

hence V(l)=(K(5)-K(0))*(1+i)^-7 = 44.67 ≠ 39.39


2) k(0) = s(0)*e^( δ-0.02)12=106.5468
k(5) = S(5)*e^( δ-0.02)7=155.034

hence V(l)=(K(5)-K(0))*e^(-(δ-0.02)7)=45.34

the answer in the attachment is is preety much different and difficult plz help....

 

You ask a lot of questions but haven't said thank you once