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A one-year a forward contract on a non-dividend paying stock is entered into at fair value when the stock price is $60. The price of
A one-year a forward contract on a non-dividend paying stock is entered into at fair value when the stock price is $60. The price of the stock is $150 six months later, and $60 at maturity. The continuously compounded risk-free interest rate is 2% per annum and does not change throughout the life of the contract. Consider a long position in the contract. The forward contract's cash flow at t=6 months is: The forward contract's cash flow at t=T=12 months is
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