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You enter into a forward contract to buy a 10-year, zero coupon bond that will be issued in one year. The face value of the bond is $1,000 and the 1-year and 11-year spot interest rates are 5.3 percent and 7.3 percent, respectively. a. What is the forward price of your contract? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose both the 1-year and 11-year spot rates unexpectedly shift downward by 1.5 percent. What is the new price of the forward contract? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

You enter into a forward contract to buy a 10-year, zero coupon bond that will be issued in one year. The face value of the bond is $1,000 and the 1-year and 11-year spot interest rates are 5.3 percent and 7.3 percent, respectively. a. What is the forward price of your contract? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose both the 1-year and 11-year spot rates unexpectedly shift downward by 1.5 percent. What is the new price of the forward contract? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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You enter into a forward contract to buy a 10-year, zero coupon bond that will be issued in one year. The face value of the bond is $1,000 and the 1-year and 11-year spot interest rates are 5.3 percent and 7.3 percent, respectively. a. What is the forward price of your contract? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose both the 1-year and 11-year spot rates unexpectedly shift downward by 1.5 percent. What is the new price of the forward contract? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Forward price b. New forward price
Transcribed Image Text:You enter into a forward contract to buy a 10-year, zero coupon bond that will be issued in one year. The face value of the bond is $1,000 and the 1-year and 11-year spot interest rates are 5.3 percent and 7.3 percent, respectively. a. What is the forward price of your contract? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose both the 1-year and 11-year spot rates unexpectedly shift downward by 1.5 percent. What is the new price of the forward contract? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Forward price b. New forward price
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You enter into a forward contract to buy a 10-year, zero coupon bond that will be issued in one year. The face value of the bond is $1,000 and the 1-year and 11-year spot interest rates are 5.3 percent and 7.3 percent, respectively. a. What is the forward price of your contract? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose both the 1-year and 11-year spot rates unexpectedly shift downward by 1.5 percent. What is the new price of the forward contract? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. a. Forward price 585.92 X b. New forward price 682.87 X $ $
Transcribed Image Text:You enter into a forward contract to buy a 10-year, zero coupon bond that will be issued in one year. The face value of the bond is $1,000 and the 1-year and 11-year spot interest rates are 5.3 percent and 7.3 percent, respectively. a. What is the forward price of your contract? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose both the 1-year and 11-year spot rates unexpectedly shift downward by 1.5 percent. What is the new price of the forward contract? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. a. Forward price 585.92 X b. New forward price 682.87 X $ $
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