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1. ## General question about the forward prices

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.

2. 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.

3. Originally Posted by 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.
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.

4. Originally Posted by mmailliw
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.

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