What is the forward price of your contract? Suppose both of the spot rates unexpectedly shift downward by 1 percent. What is the price of a forward contract otherwise identical to yours?
You enter into a forward contract to buy a 5 yr, zero coupon bond that will be issued in one year. The face value of the bond is 2,000, and the 1 year and 10 year spot interest rates are 2 percent per annum a 6 percent per annum. Both of these interest rates are expressed as effective annual yields. What is the forward price