Problem:
A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $40 $38 and the risk-free rate of interest is; 8% per annum with continuous compounding.
Required:
Question 1: What are the forward price and the initial value of the forward contract?
Question 2: Six months later, the price of the stock is $45 46 and the risk-free interest rate is still 10%8%.What are the forward price and the value of the forward contract?
Note: Give you opinion citing relevant ethical principles.