Question: A long forward contract that was negotiated some time ago will expire in three months and has a delivery price of $42. The current forward

A long forward contract that was negotiated some time ago will expire in three months and has a delivery price of $42. The current forward price for three-month forward contract is $40. The three month risk-free interest rate (with continuous compounding) is 4%. What is the value of the long forward contract? Please round the number solution to 2 decimal places.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Wildhorse Co. purchased a new machine on October 1, 2025, at a cost of $90,100. The company estimated that the machine has a salvage value of $6,460. The machine is expected to be used for 82,000...

A stock index currently stands at $30. The risk-free interest rate is 6% per annum (with continuous compounding) and the dividend yield on the index is 2% per annum. What should the futures price for...

Suppose that the risk-free interest rate is 5% per annum with continuous compounding and that the Z dividend yield on a stock index is 3% per annum. The index is standing at 27.What is the...

You find the 1-year S&P500 futures price is too high relative to the current S&P500 level, after considering factors such as interest rates and dividend yield. Therefore, you buy SPY (the ETF...

A long forward contract that was negotiated some time ago will expire in three months and has a delivery price of $40. The current forward price for three-month forward contract is $42. The three...

Question 26 2 pts A long forward contract that was negotiated some time ago will expire in three months and has a delivery price of $42. The current forward price for three-month forward contract is...

A long forward contract that was negotiated some time ago will expire in three months and has a delivery price of $ 4 0 . The current forward price for three - month forward contract is $ 4 2 . The...

Spot exchange rate is 0.7000 Canadian dollars for one Mongolian tugrik and the six-month Canadian and Mongolian risk-free interest rates are 5% and 7% (both expressed with continuous compounding)....

A short forward contract that was negotiated some time ago will expire in three months and has a delivery price of $ 4 0 . The current forward price for the three - month forward contract is $ 4 2 ....

q3 A long forward contract that was negotiated some time ago will expire in three months and has a delivery price of $40. The current forward price for the three-month forward contract is $42.50. The...

Mary lives next door to Mike. Since she works the night shift, she suggests to Mike the idea of constructing a light post between their two houses. He agrees and tells her to get the light post...

Tina, a single taxpayer, owns 100% of Rocket Corporation, an S corporation. She has an $80,000 stock basis for her investment on January 1 of the current year (Year 1). During the first 11 months of...

A system has the state variable matrix equation in phase variable form 1 x(t) -a -b = [a b] x + [ ] 4 (1) y(t) = [10]x(t). It is desired that the canonical diagonal form of the differential equation...

Assign volumePointer with the address of the smaller volume. If the volumes are the same, then assign volumePointer with nullptr.Ex: If the input is 5 4 . 0 8 8 . 0 , then the output is: 5 4 . 0 is...