Calculate the no-arbitrage price

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Reference no: EM132620273

An investor purchased a newly issued bond with a maturity of 10 years 200 days ago. The bond carries a coupon rate of 8 percent paid semiannually and has a face value of $1,000. The price of the bond with accrued interest is currently $1,147. The investor plans to sell the bond 2 years from now. The schedule of coupon payments over the first few years, from the date of purchase, is as follows:

Coupon Days after Amount ($)
First 181 40
Second 365 40
Third 547 40
Fourth 730 40
Fifth 911 40
Sixth 1095 40

Calculate the no-arbitrage price at which the investor should enter the forward contract. Let the risk-free rate be 4.5%.

Reference no: EM132620273

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