A one-year forward contract of a share, which pays no dividend before the contract matures is written when the share has a price of $50 and the risk-free interest rate is 10% a year.

A. What is the forward price?

B. If the share is worth $55 six months later, what is the value of the original forward contract at this time? If another forward contract is to be written with the same date of maturity, what should the forward price be?

Answer rating: 100% (QA)

A Forward Price We need to determine the forward price such that the value of the forward contract i... View the full answer