Forward Pricing You enter into a forward contract to buy a 10-year, zero coupon bond that will

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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 $1,000, and the 1-year and 11-year spot interest rates are 5 percent and 7 percent, respectively.

a. What is the forward price of your contract?

b. Suppose both the 1-year and 11-year spot rates unexpectedly shift downward by 2 percent. What is the new price of the forward contract?

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ISBN: 978-1259672484

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Authors: Stephen Ross ,Randolph Westerfield ,Jeffrey Jaffe

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Question Posted: Jul 10, 2024 08:01 AM

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Forward Pricing You enter into a forward contract to buy a 10-year, zero coupon bond that will

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