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CFA Level 2
Derivatives

Fair Price of Forward Contract on ABC Corp Stock

Easy Forward Pricing And Valuation Equity Forwards

ABC Corp is planning to enter into a forward contract for its stock, which is currently trading at $100. The risk-free interest rate is 5% per annum, and there is no dividend expected to be paid during the life of the forward contract, which is set to expire in one year.

Using this information, what should be the fair price of the forward contract at initiation?

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% Correct76%