A share of Amazon stock is currently worth $1,276. You plan to purchase your first share in one year, on your graduation day. You are concerned that the price will

rise by then. To hedge this risk, you enter into a forward contract to buy one share

of Amazon stock in one year. Assume that the risk-free rate is 3.4 percent (APR,

semi-annual compounding).

Calculate the appropriate price at which you can contract to buy the asset in

one year. Assume continuous compounding

Assume that eight months into the contract, the AMZN stock price is $1,250.

Calculate your gain or loss from the forward contract.

Suppose that at expiration, the price of the stock is $1,300. Calculate the value

of the forward contract at expiration.