Forward contract prices
Not what you're looking for?
You enter into a forward contract to buy a 10-year, zero-coupon bond that will be issued in one year.The face value of the bond is $1,000, and the 1-year and 11 -year spot interest rates are 4 percent per annum and 9 percent per annum, respectively. Both of these interest rates are expressed as effective annual yields (EAYs).
a. What is the forward price of your contract?
b. Suppose both the spot rates unexpectedly shift downward by 1 percent. What is the price of a forward contract otherwise identical to yours?
Purchase this Solution
Solution Summary
This solution shows how to calculate the forward price of a coupon bond according to different spot rates.
Purchase this Solution
Free BrainMass Quizzes
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.
MS Word 2010-Tricky Features
These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.
Basic Social Media Concepts
The quiz will test your knowledge on basic social media concepts.
Introduction to Finance
This quiz test introductory finance topics.
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking