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

question 41

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 6%,paid semi-annually with a price of $980.The current and effective risk-free rate of interest is 5%.What is the fair forward price?

• A) $1,029.05
• B) $969.05
• C) $933.33
• D) $968.26

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Definitions:

Perceived

Refers to how situations, actions, or conditions are interpreted or understood by an individual, often influenced by personal biases or experiences.

Constructive Conflict

A conflict that is managed and leveraged effectively to encourage diversity of thought, innovation, and problem-solving.

Superordinate Goals

Objectives requiring cooperation and collaborative effort among groups or individuals who might otherwise be in conflict.

Collaboration

Working jointly with others, especially in an intellectual endeavor, to achieve a common goal through sharing knowledge, learning, and building consensus.