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Three months ago, an investor entered into a six-month forward contract to buy a stock....

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Accounting

Three months ago, an investor entered into a six-month forward contract to buy a stock. The delivery price agreed to was $50.

Today, the stock is trading at $40. Suppose the three-month interest rate is 3 % in continuously compounded terms. Assuming the stock is not expected to pay any dividends over the next three months, what is the value of the contract held by the investor?

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