A long forward contract on a non$-$dividend$-$paying stock was entered into some time ago. It currently has six months to maturity. The risk$-$free rate of interest $($with continuous compounding$)$ is $10\%$ per annum., the stock price is $$25,$ and the delivery price $$24.$ In this case S$0=25,$ r$=0\mathrm{.}10,$ T$=0\mathrm{.}5,$ and K $($i$.$e$.,$ F$0)=24.$

a$)$ What is the value of the forward contract?

b$)$ What is the value of the contract in three months $($if S$3=$$$30)$  .

 

 

 

 

  

Answer rating: 100% (QA)

To calculate the value of the forward contract we can use the formula for a fo... View the full answer