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The complete question is: Consider a forward contract on a 4-year bond with maturity 1 year. The current value of the bond is $1018.86, it
The complete question is: Consider a forward contract on a 4-year bond with maturity 1 year. The current value of the bond is $1018.86, it has a face value of $1000 and a coupon rate of 10% per annum. A coupon has just been paid on the bond and further coupons will be paid after 6 months and after 1 year, just prior to delivery. Interest rates for 1 year out are flat at 8%. Compute the forward price of the bond.
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