The Forward Price

Carry with Income

Income received before delivery lowers the fair forward price.

highlighted = computed this step

Income lowers carry

Income paid to the asset holder reduces the forward price because the forward buyer does not receive that income before delivery.

F0=S0(1+r)T−income future valueF_0=S_0(1+r)^T-\text{income future value}

Dividend example

With income of $3.00 at maturity, the forward price is $105.00 minus $3.00, or $102.00.

F0=$105.00−$3.00=$102.00F_0=\$105.00-\$3.00=\$102.00

Storage goes the other way

Storage costs work the other way. They add to carry because the holder pays them while carrying the asset.

income reduces carry; storage costs add carry\text{income reduces carry; storage costs add carry}