FP = 100 x (1.05^2) = $110.25 at t = 2 (for the semi-annual periods)
at t=1 (today)
Spot (at t=1) $125 - [FP 110.25 / 1.05^1]
= 125 - 105
= $20
...assuming you hold the long position
Suppose we hold a forward contract on a stock with expiration 6 months from now. We entered into this contract 6 months ago so that when we entered into the contract, the expiration was T=1 year. The stock price$ 6 months ago was S0=100, the current stock price is 125 and the current interest rate is r=10% compounded semi-annually. (This is the same rate that prevailed 6 months ago.) What is the current value of our forward contract?
