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Observe a 2-year forward contract that delivers in year 2 an annuity that pays $10 in years 3, 4, and 5. The term structure is
Observe a 2-year forward contract that delivers in year 2 an annuity that pays $10 in years 3, 4, and 5. The term structure is flat (r = 5%).
- Calculate the forward price F at date 0?
- Calculate the value of the long position in the forward contract one year later if the whole term structure shifts to r = 4%
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