You own an asset which you plan to sell during the coming year. The cash price today, at t=0, of an asset is $ 200, the riskfree =3%. The forward price for delivery one year hence (at t=1) is the no-arb price. Assume that you go short the forward contract today. At t=0.5, the spot price of the asset is $ 185. We return to the original counterparty and terminate the short position in the forward contract at t= 0.5, [“complete offset”] for its fair market value and sell the asset at the spot price. What is your net revenue (net the spot price you sell at against the gain or loss on the forward contract)?

Assume that you own a dividend paying stock currently worth $145. You plan to sell the stock in 250 days. In order to hedge against a possible price decline, you wish to take a short position in a forward contract that expires in 250 days. The risk-free rate is 5.00 percent. Over the next 215 days, the stock will pay these dividends. A $1.10 dividend at three times: in 20 days, in 80 days, and in 215 days. The contract was signed, at the “No Arbitrage” forward price, expiring in 250 days. It is now 110 days since you signed the forward contract and the stock price is $142, what is the value of the forward contract at this point?