What is the forward contract worth at this time

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Reference no: EM132029956

Assume that there is a forward market for a commodity. The forward price of the commodity is $45. The contract expires in one year. The risk-free rate is 10%. Now 6 months later, the spot price is $52.

What is the forward contract worth at this time? Explain why this is the correct value of the forward contract in 6 months even though the contract does not have a liquid market as a futures contract does.

Reference no: EM132029956

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