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What is the forward price

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A non-dividend-paying stock is currently selling for $50, and the risk-free rate of interest is 8% per annum with continuous compounding for all maturities. An investor has just taken a short position in a six-month forward contract on the stock.

a. What is the forward price?(sample answer: $25.45)

b. What is the initial value of the forward contract? (sample answer: $25.45)

c. Three months later, the price of the stock is $48 and the risk-free rate is still 8% per annum. What is the forward price now? (sample answer: $25.45) What is the value of the short position in the forward contract? (sample answer: $25.45 or -$25.45)

Reference no: EM132711620

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