A share is currently trading at ₹125. It is expected to give a dividend of ₹10 per share after 4 months. Assume that the risk-free rate of return is 10% per annum. What would be approximate value of the forward contract

As the dividend of ₹10 is expected after the end of forward period (after 4 months, while delivery is after 3 months), it is not relevant for valuation of forward contract for 3 months. Value of Forward contract on the share for delivery after 3 months would be: $F = S_0 \times (1 + r)^t$ $F = ₹125 \times (1 + 0.10)^{0.25}$ (since 3 months = 0.25 years) $F = ₹125 \times (1.10)^{0.25}$ $F = ₹125 \times 1.02411368$ $F = \textbf{₹128.01}$