1.One month ago, an investor entered into a forward agreement to sell a bond in three months' time at a price of $100.The current spot price for the bond is $101.50.Suppose the term structure of interest rates is such that the 1-month spot rate is 2%, the 2-month spot rate is 4% and the 3-month spot rate is 6%.Assume all interest rates are based on continuous compounding.

a.Given the above information, what is the present value of the investor's position assuming the bond does not pay a coupon?

b.Suppose instead the bond pays a 5% coupon and the next coupon payment is one month from today.In that event, what is the present value of the investor's position?