1. Forward on Zero Coupon Bond Consider a 1-year forward contract on a zero coupon bond with 3-year maturity. The face value of the bond is $100. Following is the current term structure of zero rates (with continuous compounding): maturity (years) nterest rate 2% 3% 4% (a) If there is no arbitrage, what is the forward price? (b) A bond investor wants to hedge and takes a short position in the 1-year forward with the forward price found in (a). One year later, the term structure of zero rates changes as follows maturity (years) interest rate 1% 2% 3% What is the payoff of the short position of the forward