Answer:
-$1.96
Step-by-step explanation:
A future contract is defined as an agreement to make a purchase at a certain time in the future at a particular price.
While present contract is executable immediately.
In this scenario if we want to negotiate today the price of the contract will be $40, while if we negotiate a forward contract for 3 months it will be $42
Therefore value of contract is present value of 40 - 42= -$2
It is given
Rate= 80%= 0.08
Time= 3 months= 3/12= 0.25 years
The present value can be calculated as
Value of present contract= -2e^(0.08* 0.25)
Value of present contract= -$1.96