Question
Below is a schedule of todays prices for cashflows that are due in the future. These cashflows have zero risk of default. Assume that you
Below is a schedule of todays prices for cashflows that are due in the future. These cashflows have zero risk of default. Assume that you can buy or sell any amount without affecting prices (the market is very much larger than any single trader). Assume that you can buy or sell fractions of $ 100 par value.
When available | Amount available | Todays price |
end of year 1 | $ 100 | $ 90.9091 |
end of year 2 | $ 100 | $ 81.1622 |
end of year 3 | $ 100 | $ 71.1780 |
end of year 4 | $ 100 | $ 63.5518 |
end of year 5 | $ 100 | $ 56.7427 |
Find todays 1 year forward price for a bond with following features.
To be issued at the end of year 1. Coupon=$ 100/year payable at year-end. The first coupon is due at the end of year 2 (one year after the issue date). Principal=$ 1,000. Maturity 4 years from issue date (or end of year 5 from today). No risk of default.
Todays forward price=$________
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