1-year long forward contract is entered into on a non-dividend paying stock when the stock price is $40 and the risk free rate is 10%.

1) What are the initial forward price and the initial value of the forward contract?

2) Six months later, the stock price is $45 and the risk free rate is still 10%. What is the forward price on a new (zero value) contract? What is the value of the existing contract?

The spot price of silver is $15 per ounce. The storage costs are $0.24 per ounce per year, payable quarterly in advance, and the interest rate is 10%. What is the forward price for silver to be delivered in 3 months?

Consider a forward contract on 5,000 bushels of corn for delivery in 6 months. The spot price of corn is $3.60 per bushel and the risk free rate is 8%. Corn costs $0.20 per bushel to store and insure for the six month period, payable in advance.

1) What is the initial fair forward price (per bushel)?

2) Assume the actual forward price is $4.25 per bushel. Demonstrate how you could profit from an arbitrage trade. Size your trade to one forward contract, show all transactions you would make and give their cash flows now and at maturity. Most importantly, how much is your arbitrage profit?