An off-market forward contract is a forward where either you have to pay a premium or you receive a premium for entering into the contract. (With a standard forward contract, the premium is zero.) Suppose the effective annual interest rate is 5 % and the S-R index is 1000. Consider 1-year forward contracts.

a) Suppose you are offered a long forward contract at a forward price of $ 1200. How much would you need to be paid to enter into this contract $ ?

b) Suppose you are offered a long forward contract at a forward price of $ 825. How much would you need be willing to pay to enter into this contract $ ?