Suppose you buy a one-year forward contract at $65. At expiration, the spot price is $73. The risk-free rate is 10 percent. What is the value of the contract at expiration?
a. $8.00
b. -$8.00
c. $0.00
d. $7.27
e. none of the above
Answer: A
Suppose you buy a one-year forward contract at $65. At expiration, the spot price is $73. The risk-free rate is 10 percent. What is the value of the contract at expiration?
a. $8.00
b. -$8.00
c. $0.00
d. $7.27
e. none of the above
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