Good day, I have been tasked with this question and I am unsure if my understanding and work so far is correct.>On January 1st 2018 AAA shares were trading at $30USD$ per share. >The shares pay a quarterly dividend of $0.60c$ per share if the shareholderhas held the share for at least 10 days before the dividend payment.>**Calculate the fair strike of the one year forward on AAA given that the$USD$ interest rate is 1%.**What I have done so far is find the value of the forward in 1 year. $Fwd=30*(1.01)-0.6*(1.0025)^3-0.6*(1.0025)^2-0.6*(1.0025)^1-0.6=27.89098098 USD$I am not sure if I understood the concept of a **fair strike of a forward** as asked in the question
You are very Close.. If the 1% interest rate is compounded annually the quarterly compounding rate i .249% not .25% which pushes the forward to 27.953.
