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Consider a security that sells for $1,000 today. A forward contract on this security that expires in two years is currently priced at $1,100. The
Consider a security that sells for $1,000 today. A forward contract on this security that expires in two years is currently priced at $1,100. The annual rate of interest is 6.75 percent. Assume that this is an off-market forward contract. Calculate the value of the forward contract today, V0(0,T), and indicate whether payment is made by the long to the short or vice versa?
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