KMW, Inc. plans to pay a dividend of $0.50 per share both 3 and 6 months from today. KMW's share price today is $36.00 and the continuously compounded quarterly interest rate is 1.5%. What is the price of a 6-month prepaid forward contract, which expires immediately after the second dividend?

KMW, Inc. plans to pay a dividend of $0.50 per share both 3 and 6 months from today. KMW's share price today is $36.00 and the continuously compounded quarterly interest rate is 1.5%. What is the price of a 6-month prepaid forward contract, which expires immediately after the second dividend?

KMW, Inc. plans to pay a dividend of $0.50 per share both 3 and 6 months from today. KMW's share price today is $36.00 and the continuously compounded quarterly interest rate is 1.5%. What is the price of a 6-month prepaid forward contract, which expires immediately after the second dividend?



(a) $35.00
(b) $35.02
(c) $36.98
(d) $37.00

Answer: b