Which one of these statements related to forward contracts is correct? the buyer of a forward contract on corn benefits if the price of corn increases during the contract period. the buyer of a forward contract has the right, but not the obligation, to execute the contract any time up to and including the settlement date. forward contracts cannot be sold but must be executed by the original parties to the contract. forward contracts recognize profits and losses on a daily basis. the price at which a forward contract closes is set equal to the closing spot price on the settlement date.

Suppose that a major city’s main thoroughfare, which is also an interstate highway, will be completely closed to traffic for two years, from january 2014 to december 2015, for reconstruction at a cost of $535 million. if the construction company were to keep the highway open for traffic during construction, the highway reconstruction project would take much longer and be more expensive. suppose that construction would take four years if the highway were kept open, at a total cost of $800 million. the state department of transportation had to make its decision in 2014, one year before the start of construction (so that the first payment was one year away). so the department of transportation had the following choices: (i) close the highway during construction, at an annual cost of $267.5 million per year for two years. (ii) keep the highway open during construction, at an annual cost of $200 million per year for four years. now suppose the interest rate is 80%. calculate the present value of the costs incurred under each plan.