Forward contract and pricing
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A one year long forward contract on a non-dividend-paying stock is entered into when the stock price is $40 and the risk free rate of interest is 10% annually with continuous compounding.
a.) what is the forward price?
b.) six months later, the price of the stock is $45 and the risk-free interest rate is still 10%. What are the forward price and the value of the forward contract?
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Solution Summary
Calculation of forward price are provided.
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