Value of Forward Contract at Initiation

Very Easy Forward Pricing And Valuation Equity Forwards

Imagine an investor has entered into a forward contract to buy 100 shares of a company at a forward price of $50 per share, to be settled in six months. The current stock price is $48, and the risk-free rate is 5% annually. Which of the following statements best describes the value of the forward contract at initiation?

The value of the forward contract is $200.

The value of the forward contract is $0.

The value of the forward contract is $200, discounted to present value.

Hint

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