An investor took a long position in a forward contract on a stock. At the time of the contract initiation:

• The stock was selling at $100.
• The stock would pay a dividend of $1.50 in 60 days, $1.50 in 120 days, and another $1.50 in 180 days.
• The no-arbitrage forward price was $98.98.
• The contract would expire in 250 days.

Suppose the risk-free rate is 5.25%. At expiration the stock price is $80. What's the value of the forward contract at expiration?

Explanation: S_T = $80
F₀(T) = $98.98
VT(0, T) = 80 - 98.98 = -$18.98
The contract expires with a value of negative $18.98, a gain to the short position.