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CFA Level 2
Derivatives

Futures Contract Gain or Loss Calculation

Medium Forward Pricing And Valuation Futures Contracts

Consider a trader who enters into a long futures contract on a commodity with a current spot price of $100. The futures price is determined to be $105 for a contract that expires in 6 months. The risk-free rate is 4% per annum, and the cost of carry for holding the commodity is negligible.

At contract expiration, the spot price of the commodity rises to $110. What is the gain or loss for the trader upon expiration of the futures contract?

Hint

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