General question about the forward prices

[makros5]

Hi everyone,

Can some one please tell me how do calculate the forward price and prepaid forward price for a stock with the discrete dividends. Please help. I know it is very basic question. But I am getting wrong answer for one question.

Thanks in advance

[Akki]

Forward price of a stock with discrete devidend is

(Current price - Present value of dividends)

For prepaid forward price discount the above formula i.e. multiply with e^-rt.

[mmailliw]

Forward price of a stock with discrete devidend is

(Current price - Present value of dividends)

For prepaid forward price discount the above formula i.e. multiply with e^-rt.

Actually, (current price minus present value of the dividends) is the prepaid forward price (what you pay now to get the stock in the future); to get the forward price, you convert it to future value by multiplying by e^rt.

[Akki]

Actually, (current price minus present value of the dividends) is the prepaid forward price (what you pay now to get the stock in the future); to get the forward price, you convert it to future value by multiplying by e^rt.

You are right, thanks for correcting my mistake.

[makros5]

Thank you so much for the reply. it really helps me.