Consider a Forward Contract to Buy a Ten-Year Bond in One

question 69

Multiple Choice

Consider a forward contract to buy a ten-year bond in one year; currently the eleven-year bond has a coupon rate of 10%,paid semi-annually with a price of $1,050.The current and effective risk-free rate of interest is 4%.What is the fair forward price?

• A) $991.01
• B) $992.04
• C) $1,092.04
• D) $1,009.62

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Definitions:

Accredited Investor

An individual or a business entity that is allowed to deal in securities that may not be registered with financial regulatory authorities.

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A defense in which the defendant argues that he or she applied the appropriate degree of attention, care, and research expected of a party in a given situation and had reasonable grounds to believe that certain facts and statements were accurate and had no omission of material facts.