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Assume that you are long in a forward on stock A. The forward contract expires in 6 months. The forward price that you have agreed
Assume that you are long in a forward on stock A. The forward contract expires in 6 months. The forward price that you have agreed on is 50. Stock A pays no dividends.
- What is the payoff from the forward if stock A is trading at 57 in 6 months?
- What is the payoff from the forward if stock A is trading at 45 in 6 months?
- Draw a payoff diagram that shows the payoff of the long forward as a function of the underlying stock price.
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