solve question 20-2

20-2. (Calculating forward contract payouts) Repeat Study Problem 20-1, but this time draw the profit or loss graph from the perspective of the individual who sold (is short on) the forward contract. 0-1. (Calculating forward contract payouts) Construct a delivery date profit or loss graph similar to Figure 20.2 for a long position in a forward contract with a delivery price of $65. Analyze the profit or loss for values of the underlying asset ranging from $40 to $80. Delivery Date Profits or Losses (Payoffs) from a Forward Contract The term long position is often used to refer to the ownership of a security, contract, or commodity. That is, if you purchase a share of stock, you are said to be "long" on the stock, and when the price of the stock goes up, the holder of the long position benefits or profits. Correspondingly, a short position is the opposite of a long position. It involves the sale rather than the purchase of a security, contract, or commodity, and the payoff to a short position is simply the negative of the payoff to a long position. If you would make money with a long position, this means you would lose money with a short position, and vice versa. (Panel B) Short Position in Forward Contract