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An asset is priced at $100. A two-year forward contract is created, with mark-to-market in one year (Month 12). The risk-free rate is 2%. The
An asset is priced at $100. A two-year forward contract is created, with mark-to-market in one year (Month 12). The risk-free rate is 2%. The asset is worth $105 in Month 12.
6. What is the amount of the credit risk at Month 0?
$0
$2
$3
$5
7. What is the amount of the credit risk at Month 12?
$0
$2
$3
$5
8. Who bears the credit risk at Month 12?
The long
The short
9. What is the reset price of the forward at Month 12?
$100
$104.04
$105
$107.10
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