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Determining the value of the contract

Suppose you have a short position in a forward contract for 500 troy ounces of gold at $920. The contract has 10 months to expire. Currently, the spot price of gold is $922, and the risk-free rate and the rate of storage cost are 8% and 3% per annum, respectively. Both rates are continuously compounded. What is the value of the contract to you?

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Finance Basics: Determining the value of the contract

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Currently, the spot price of gold is $922, and the risk-free rate and the rate of storage cost are 8% and 3% per annum, respectively. Both rates are continuously compounded. What is the value of the contract to you?

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Solution Preview :

Prepared by a verified Expert

Finance Basics: Determining the value of the contract

Reference No:- TGS042751

Have a Question? (oR Write a Review)

Recent Questions Asked Finance Basics

Q : After-tax cost of borrowing

Q : Compute the sample mean hours wasted per year

Q : Financial needs after retirement

Q : What is the overall reliability for the product

Q : Determining the value of the contract

Q : Construct ad-sras and lras curves for economy experiencing

Q : Determine the optimal sales mix and the contribution margin

Q : Determining the current ratio of peter motor works

Q : Prepare a flexible budget performance report

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Solution Preview :

Prepared by a verified Expert

Finance Basics: Determining the value of the contract

Reference No:- TGS042751

Recent Questions Asked Finance Basics

Q : After-tax cost of borrowing

Q : Compute the sample mean hours wasted per year

Q : Financial needs after retirement

Q : What is the overall reliability for the product

Q : Determining the value of the contract

Q : Construct ad-sras and lras curves for economy experiencing

Q : Determine the optimal sales mix and the contribution margin

Q : Determining the current ratio of peter motor works

Q : Prepare a flexible budget performance report

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