Question
You have decided to take on the following contract: The contract delivers $10M face value of 9-year bonds in one year from now. You
You have decided to take on the following contract: The contract delivers $10M face value of 9-year bonds in one year from now. You will pay for the bonds in 2 years. The current term structure is flat at an annualized rate of 4%. Compute the cashflow at T=2 for the contract. Suppose after you sign the contract, interest rates go up to 5.2%. What is the change in value of the contract that you signed?
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Microeconomics An Intuitive Approach with Calculus
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