A Short Forward Contract That Was Negotiated Some Time Ago

question 3

Short Answer

A short forward contract that was negotiated some time ago will expire in three months and has a delivery price of $40. The current forward price for a three-month forward contract is $42. The three-month risk-free interest rate with continuous compounding) is 8% per annum. What to the nearest cent) is the value of the short forward contract? _ _ _ _ _ _

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Definitions:

Materials Requisitions

Requests or orders for company materials to be used in production, indicating types, amounts, and intended use.

Period Cost

Costs that are not directly tied to the production process and are expensed in the period in which they are incurred, such as selling, general, and administrative expenses.

Direct Labor Cost

The wages of factory workers who are directly involved in converting materials into a finished product.

Advertising Costs

Expenses associated with promoting a product, service, or brand to potential customers.