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CFA Level 2
Derivatives

Forward Price Calculation for XYZ Corporation

Medium Forward Pricing And Valuation Equity Forwards

Jane is considering entering into a forward contract to buy shares of XYZ Corporation, which is currently trading at $50 per share. The risk-free interest rate is 4% per annum, and the dividend yield on XYZ shares is 2% per annum. Jane wants to find the forward price of the equity. Assuming she plans to enter into a forward contract that matures in one year, what will be the forward price she should expect to pay for the shares?

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