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Find the equilibrium forward price

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Reference no: EM132859156

CURRENT BOND PRICE = $1050, COUPON payments will be made $50 each in 6 months and 12 months.

If risk free zero rates are 7%, and 7.3%, for 6months and 12 months , respectively; and forward contract delivery period is 12 months .

Questions

1) Find the equilibrium forward price

2) What is the arbitrage strategy (in details like the ones done in the lecture video for full credit) if forward price = 1010

3) With the above arbitrage strategy, find the arbitrage profit that you'd earn.

Reference no: EM132859156

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