You have a perpetuity with payments annually starting in year 5. In year 5, 10 is the first payment, and after that it grows at 1% (per year) forever. A forward contract delivers this perpetuity in year 3 (year 3 the forward price is paid and in year 5 the first perpetuity payment is paid).

- Calculate the forward price at date 0 (r=2% is flat)?

- Calculate the value of the long position in this forward contract one year later if in year 1 the term structure shifts to 1.6% (after is flat)?