A 6 treasury bond is trading at 1040 per 1000 of face value, Ask an Expert

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A 6% Treasury bond is trading at $1,040 per $1,000 of face value. It will make a coupon payment (i.e., 6%*1000/2=$30) 90 days from now. The yield curve is flat at 5% over the next 120days (to say, risk--free interest will be constant at 5%). Assume that all interest rates are discrete. Also, use 360 day-year convention).

a. Forward price per $1,000 of face value for a 120-day forward contract?

b. After 30 days. The value of the bond is $1,060. Find the value of the forward contract on the bond to the long position.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91779371

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