# Determination of Forward Price

- The price of a forwards contract is given by the equation below:
- F
_{0}= S_{0}e^{rt}in the case of continuously compounded risk free interest rate, r - F
_{0}= S_{0}(1+r )^{t}in the case of annual risk free interest rate, r - Where:
- F
_{0}: forward price - S
_{0}: Spot price - t: time of the contract

- F

- F
**Known income from underlying**- If the underlying asset on which the forward contract is entered into provides an income with a present value, I, then the forward contract would be valued as:
- F
_{0}= (S_{0}â€“ I )e^{rt}

- F

- If the underlying asset on which the forward contract is entered into provides an income with a present value, I, then the forward contract would be valued as:
**Known yield from underlying**- If the underlying asset on which the forward contract is entered into provides a continuously compounded yield, q, then the forward contract would be valued as:
- F
_{0}= S_{0}e^{(r-q)t }

- F

- If the underlying asset on which the forward contract is entered into provides a continuously compounded yield, q, then the forward contract would be valued as:
- q: continuously % of return on the asset divided by the total asset price