Susan bought a two-year equity forward contract at $152 and suppose today is nine months to expiration.
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Question:
Susan bought a two-year equity forward contract at $152 and suppose today is nine months to expiration. The underlying is currently trading for $165, and interest rates are 5% on an annual compounding basis.
- If there are no other carry cash flows, how much is the value of the existing forward contract today?
- Suppose that instead of buying a forward contract, Susan bought a two-year equity futures contract at $152 and there are now nine months to expiration. Today's futures price is $167. There are no other carry cash flows. After marking to market, how much is the value of the existing futures contract today?
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