Question: ( b ) The initial value ( not the price ) of this forward contract is zero by design; otherwise there will be arbitrage opportunities

(

)

The initial value

(

not the price

)

of this forward contract is zero by design; otherwise there will be arbitrage opportunities for you and other traders. After three months, the price of the stock went down to $

48

per share. The risk

-

free rate of interest is still

8 %

per annum. What is the forward price? And what is the value of the short position in the forward contract?

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