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What is the forward contract worth at the given time

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Question: 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 risk free rate is 10%. Now, six month 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.

Reference no: EM131688301

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