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Suppose we hold a forward contract on a stock with expiration 6 months from now. We entered into this contract 6 months ago so that
Suppose we hold a forward contract on a stock with expiration 6 months from now. We entered into this contract 6 months ago so that when we entered into this contract, the expiration was T=1 year. The stock price$ 6 months ago was S0=100, the current stock price is 125 and the current interest rate is r=10% compounded semi-annually. (This is the same rate that prevailed 6 months ago). What is the current value of our forward contract?
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