Question: An off-market forward contract is a forward where either you have to pay a premium or you receive a premium for entering into the contract.

An off-market forward contract is a forward where either you have to pay a premium or you receive a premium for entering into the contract. (With a standard forward contract, the premium is zero.) Suppose the effective annual interest rate is 18 % and the S-R index is 1000. Consider 1-year forward contracts. a) Suppose you are offered a long forward contract at a forward price of $ 1205. How much would you need to be paid to enter into this contract $ ? b) Suppose you are offered a long forward contract at a forward price of $ 1030. How much would you need be willing to pay to enter into this contract $ ?

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