Question: Derivatives - C ontinuous Compounding. Please, break down every step. Six months ago an investor opened a long position on the 12-month forward contract on

Derivatives - Continuous Compounding.

Please, break down every step.

Derivatives - Continuous Compounding. Please, break down every step. Six months ago

Six months ago an investor opened a long position on the 12-month forward contract on a non-divided paying stock index that was then worth 3 000. The same asset is now worth 2 900. Now the term structure of the short interest rates is exactly like indicated by the forward rates six months ago. The 3-month spot rate was then 3% p.a., whereas the corresponding spot rates for the maturities of 6, 9 and 12 months were 4%, 5% and 6% (all p.a.) respectively. What is the value of the forward contract for the investor now

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