Question
Please help will upvote immediately. We sell a 2-year bond with annual coupon rate 7%, a year from now. We sold it to someone and
Please help will upvote immediately.
We sell a 2-year bond with annual coupon rate 7%, a year from now. We sold it to someone and they receive the first coupon 2 years from now after paying for it 1 year from today. The face value of the bond is $100.
Question 1: What is the forward price for this contract?
Question 2: Assume that the bond's forward price must be $101.5 in order for the person to receive it. What is the NPV of this transaction as of today?
Question 3: What is the time-0 expectation of the price of the ABC bond to be delivered at time 1
Spot rates are 2.6% for maturity 1-Year
Spot rates are 4% for maturity 2-Year
Spot rates are 4.9% for maturity 3-Year
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