Answer: $9,897.

## Explanation Using the **forward pricing formula with discrete dividends**: **F = [S₀ - PV(Dividends)] × (1 + r)^T** Given: - S₀ = $10,000 - Dividend = $300 in 6 months (0.5 years) - r = 2% annual compounding - T = 1 year **Step 1: Calculate present value of dividend** PV(Dividend) = $300 / (1 + 0.02)^0.5 = $300 / 1.00995 ≈ $297.04 **Step 2: Calculate adjusted spot price** S₀ - PV(Dividends) = $10,000 - $297.04 = $9,702.96 **Step 3: Calculate forward price** F = $9,702.96 × (1 + 0.02)^1 = $9,702.96 × 1.02 = $9,897.02 Therefore, the equilibrium 1-year forward price is **closest to $9,897** (Option A). This makes sense because the dividend payment reduces the forward price compared to a non-dividend paying stock.

Author: LeetQuiz Editorial Team