Refer to Problems 19-41 and 19-42.

Instructions:

1. What is the notional value of the lobster forward contract described in Problem 19-41? What is the fair value of the forward contract during its life?

2. What is the notional value of the Korean won futures contract described in Problem 19-42? What is the fair value of the futures contract during its life?

Data from 19-41

Candra Christensen Cuisine operates a chain of fine seafood restaurants. The company makes very detailed long-term planning. On October 1, 2011, Candra Christensen determined that it would need to purchase 800,000 pounds of New England lobster on January 1, 2013. Because of the fluctuations in the price of New England lobster, on October 1 the company negotiated a special forward contract with Lisa Investment Bank for Candra Christensen to purchase 800,000 pounds of New England lobster on January 1, 2013, at a price of $9,600,000. The price of New England lobster was $12 per pound on October 1. Lisa Investment Bank has a staff of financial analysts who specialize in forecasting lobster prices. These analysts are predicting a drop in worldwide lobster prices between October 1, 2011, and January 1, 2013. On December 31, 2011, the price of a pound of New England lobster is $15. On December 31, 2012, the price of a pound of New England lobster is $9. The appropriate discount rate throughout this period is 10%.