. 100 days ago you purchased a newly issued bond with a maturity of 10 years. The bond carries a coupon rate of 8% paid semiannually and has a face value of $1,000. The price of the bond with accrued interest is currently $1,146.92. You plan to sell the bond 365 days from now. The schedule of coupon payments over the first two years, from the date of purchase, is as follows: Coupon Days after Purchase Amount Coupon nr Days after Purchase Amount First 181 $40 Second 365 $40 Third 547 $40 Fourth 730 $40 A. Should you enter into a long or short forward contract to hedge his risk exposure? Calculate the no-arbitrage price at which you should enter the forward contract. Assume that the risk-free rate is 6%. [5] B. The forward contract is now 180 days old. Interest rates have fallen sharply, and the risk-free rate is 4 %. The price of the bond with accrued interest is now $1,302.26. Determine the value of the forward contract now and indicate whether you have accrued a gain or loss on your position.