Forward Contract Profit/Loss Calculation

Very Hard Derivative Pricing And Valuation Forward Contracts

Consider a trader who enters into a one-year forward contract to purchase 100 shares of a company's stock at a forward price of $50 per share. The current spot price of the stock is $45, and the risk-free rate is 5% per annum, compounded continuously.

At the end of one year, the stock price rises to $60. What is the profit or loss the trader realizes from this forward contract?

The trader realizes a profit of $1,500.

The trader realizes a loss of $1,500.

The trader breaks even on the transaction.

Hint

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