Mr. X, is a Senior Portfolio Manager at ABC Asset Management Company. He expects to purchase a portfolio of shares in 90 days. However, he is…

Mr. X, is a Senior Portfolio Manager at ABC Asset Management Company. He expects to purchase a portfolio of shares in 90 days. However, he is worried about the expected price increase in shares in coming day and to hedge against this potential price increase he decides to take a position on a 90-day forward contract on the Index. The index is currently trading at 2290. Assuming that the continuously compounded dividend yield on the same index is 1.75% and risk-free rate of interest is 4.16%, you are required to determine: (a) The justified forward price on this contract. (b) The position Mr. X should take in forward contract on the Index. (c) Gain/ loss on the position taken if after 28 days of the purchase of the contract the Index value stands at 2450. (d) Gain/ loss on the position taken if at expiration of 90 days the Index Value is 2470.