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(b) A six month long forward contract on a nondividend paying stock is purchased when the price is $42, and the risk-free rate is 1.5%
(b) A six month long forward contract on a nondividend paying stock is purchased when the price is $42, and the risk-free rate is 1.5% per annum (annual) with continuous compounding. (i) What is the delivery price in 6 months? (ii) What is the initial value of the forward contract, and (iii) Two months later, the price of the stock is $45, and the risk free rate is still 1.5%. What is the value of the forward contract in two months?
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