Several months ago, XYZ entered into a long forward contract on an asset with no income....
Several months ago, XYZ entered into a long forward contract on an asset with no income. XYZ agreed to pay $30 to seller at maturity. Today, the contract matures in 9 months. The risk-free rate with continuous compounding is 8.5% per annum, the underlying asset price is $38.55. Calculate the value of the above forward contract. Round your answer to the nearest 2 decimal points. For example, if your answer is $12.345, then enter "12.35" in the answer box.
Homework Answers
The Fair Value of Forward Contract = S*e^(-rt)
Where S is Spot Price (S=$38.55)
r is risk free rate (r=8.5%)
t is time to expiry (t= 9 months= 0.75 years)
Therefore, fair value of forward contract = 38.55* e^(-0.085*.75)
= $ 36.17
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Several months ago, XYZ entered into a long forward contract on
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