Question
You are in the USA. Todays date is 20 July 2020. A forward contract, maturing on 1 March 2020, has as underlying security a 5%
You are in the USA. Todays date is 20 July 2020. A forward contract, maturing on 1 March 2020, has as underlying security a 5% coupon bond (paying semi-annual coupons) maturing on 15 May 2025. The underlying bonds current price is 124-7+. The OIS curve is currently flat at 1%, with continuous compounding.
(a) What is the current dirty price of the bond, including accrued interest? 1
(b) What are the cash flows for the underlying bond between now and the futures contracts maturity?
(c) What is the dirty forward price?
(d) What is the clean forward price?
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