Forward price and the initial value of the forward contract

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Reference no: EM132046025

A one-year-long forward contract on a non-dividend-paying stock is entered into when the stock price is $50 and the risk-free interest rate is 5% per annum (continuous compounding).

(a) What are the forward price and the initial value of the forward contract?

(b) Six months after the signing of the forward contract, the price of the stock is $55 and the risk-free interest rate is still 5%. What is the new market forward price for the same contract (which will now mature in 6 months)? What is the value of the forward contract signed 6 months ago?

Reference no: EM132046025

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