Assume that a financial asset exists whose current (spot) price is S_t. This asset pays no dividends. A forward contract on this asset exists with expiration at date T. The price of this forward contract today is F_t. The price of the spot asset (and therefore the forward contract) at expiration can be written as S_T.

(a) If I buy one forward contract today, what is the payoff on the forward contract at date T?

(b) Write down the discounted value of the components of the payoff in part a). Set this discounted value equal to the amount of money which changes hands at the purchase of a forward contract, and solve for the forward price.

(c) Examine your answer to part b). Is there any relation between discounted cash flow analysis and derivative pricing?