Please answer the questions below:

Jennifer Carson, CFA, has been hired to review data on a series of forward contracts for a major client. The client

has asked for an analysis of a contract with each of the following characteristics:

1. A forward contract on a U.S. Treasury bond

2. A forward rate agreement (FRA)

3. A forward contract on a currency

Information related to a forward contract on a U.S. Treasury bond: The Treasury bond carries a 6% coupon and

has a current spot price of $1,071.77 (including accrued interest). A coupon has just been paid and the next coupon

is expected in 183 days. The annual risk-free rate is 5%. The forward contract will mature in 195 days.

Information related to a forward rate agreement: The relevant contract is a 3 9 FRA. The current annualized

90-day money market rate is 3.5% and the 270-day rate is 4.5%. Based on the best available forecast, the 180- day

rate at the expiration of the contract is expected to be 4.2%.

Information related to a forward contract on a currency: The risk-free rate in the U.S. is 5% and 4% in

Switzerland. The current spot exchange rate is $0.8611 per Swiss France (SFr). The forward contract will mature

in 200 days.

12. Based on the information given, what initial price should Carson recommend for a forward contract on the

Treasury bond?

A) $1,073.54. C) $1,035.12.

B) $1,070.02. D) $1,048.23

13. Based on the information given, what initial price should Carson recommend for the 3 9 FRA?

A) 5.66%. C) 4.96%.

B) 4.66%. D) 5.16%.