The following information relates to a forward contract written on a bond: Bond price = $95 Maturity = 1 year Coupon 1, paid in 6 months = $3; Coupon 2. paid immediately prior to maturity of forward = $2 Riskless rate of interest = 5% What is the forward price? A $94.43 B $85.77 $94.79 D $93.79

The following information relates to a forward contract written on a bond: Bond price = $95 Maturity = 1 year Coupon 1, paid in 6 months = $3; Coupon 2. paid immediately prior to maturity of forward = $2 Riskless rate of interest = 5% What is the forward price? A $94.43 B $85.77 $94.79 D $93.79

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

Problem 1PS

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Question

The following information relates to a forward contract written on a bond:
Bond price = $95
Maturity = 1 year
Coupon 1, paid in 6 months = $3; Coupon 2, paid immediately prior to maturity of forward = $2
Riskless rate of interest = 5%
What is the forward price?
A) $94.43
B $85.77
c) $94.79
D) $93.79

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