35 Forward Pricing You enter into a forward contract to buy a 10-year, zero coupon bond that...
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35 Forward Pricing 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 £100,000, and the one-year and 11-year spot interest rates are 5 per cent and 9 per cent, respectively.
(a) What is the forward price of your contract?
(b) Suppose both the one-year and 11-year spot rates unexpectedly shift downwards by 2 per cent. What is the new price of the forward contract?
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Kirti Kaushal
Having experience of more than 10 years is good enough to coach my students. Currently, I am working as an active supervisor of ACCA students. In my career, I helped students in financial accounting, management accounting, cost accounting, financial reporting, taxation, and audit. I also helped students publish their articles or papers in good journals. I also helped students with thesis and objective writing.
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