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9. Assume that there is a forward market for a commodity. The forward price of the commodity is $45. The contract expires in one year.
9. Assume that there is a forward market for a commodity. The forward price of the commodity is $45. The contract expires in one year. The risk free rate is 10 percent. Now six months later, the spot price is $52. What is the forward contract worth at this time? Explain why this is the correct value of the forward contract in six months even though the contract does not have a liquid mar- ket as a futures contract does
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