Initially, the price of the stock is $40 and I want to purchase a 1-year future. Six

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Initially, the price of the stock is $40 and I want to purchase a 1-year future.

Six months later, the price of the stock is $45 and the risk-free interest rate is still 5%. What are the forward price and the forward value of the contract?

Now, I find out that the forward price is $46.139...

Can I find the forward value by 46.139...-42.0508...

=4.09...

Or should we use 45-42.0508...=3.99

Why and why not? Explain.

Related Book For answer-question

Income Tax Fundamentals 2013

ISBN: 9781285586618

31st Edition

Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill

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Posted Date: May 24, 2023 03:06 AM

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Initially, the price of the stock is $40 and I want to purchase a 1-year future. Six

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To calculate the forward price and the forward value of a futures contract we need to consider the current stock price the riskfree interest rate and ... View the full answer

Income Tax Fundamentals 2013

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