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David holds 2 derivatives on stock ABC: one is a 1-year long forward at 85, another one is a 1-year long call option with a
David holds 2 derivatives on stock ABC: one is a 1-year long forward at 85, another one is a 1-year long call option with a strike price of 85. The call option premium is 5. The annual interest rate is 5%. Stock ABC is trading at 100 a year from now. Compare the following:
- Payoff from the forward derivative a year from now
- Payoff from the call derivative a year from now
- Profit from the forward derivative a year from now
- Profit from the call derivative a year from now
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