thommo77

I just tried typing it and it was taking too long. Here’s some comments on the problem:
1) your method of calculation is correct (except you used the wrong interest rate.)
2) when you get to the final figure it will be positive or negative.
3) deciding who gains or loses from the figure in #2
a) your way is correct only when doing valuations when the forward contract IS IN EFFECT
b) if it’s a problem like this dealing with an off-market forward contract that IS NOT IN EFFECT, go opposite of what you normally do.
If you’re still looking for more explanation, leave your e-mail. I can draw some diagrams or something and it’ll be easier for you to see what i’m talking about.