Consider an existing old long forward contract with delivery price of $0.5312 per DM. The contract was for the delivery of 1 million Marks. This old contract would expire in two months. Assume that now is March 1999 and the March spot Dollar-DM exchange rate was $0.6125. The U.S. and German interest rates (annualized, continuously compounded) were r = 6% and = 7.5%, respectively.

What was the value in March of this long forward contract? (please take the contract size into your consideration.)

 

Round the number solution to 2 decimal places, such as -31.23 or 31.23. Note that value can be positive or negative.

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Solution To calculate the value of the long forward contract in March we need to calculate the prese... View the full answer