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Homework answers / question archive / A 6 month long forward contract on a non-dividend-paying stock is entered into when the stock price is $37 and the risk-free rate of interest is 8
A 6 month long forward contract on a non-dividend-paying stock is entered into when the stock price is $37 and the risk-free rate of interest is 8.25% per annum with continuous compounding. (a) What are the forward price and the initial value of the forward contract? (b) Six months later, the price of the stock is $41 and the risk-free interest rate is still 8.25%. What are the forward price and the value of the forward contract?