Assume that there is a forward market for a commodity the, Ask an Expert

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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 riskfree rate is 10 percent. Now, six 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 six months even though the contract does not have a liquid market like a futures contract.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92078733

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