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CFA Level 2
Derivatives

Calculating Equity Forward Price

Very Easy Forward Pricing And Valuation Equity Forwards

In the context of forward contracts, a forward contract on equity allows the buyer to purchase the underlying stock at a specified price on a future date. For a stock with a current price of $100, a risk-free interest rate of 5% per annum, and no dividends expected to be paid, the forward price can be calculated using the formula:

Forward Price = Spot Price * e^(risk-free rate * time)

Given this information, what is the forward price of the stock for a contract that matures in 1 year?

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