Value of the forward contract on the bond to long position

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Suppose you long a 180-day forward contract on a 9% corporate bond with a spot price of $1,294 that has just paid a coupon and will make another coupon payment in 75 days.

The risk-free rate is 6%.

1) Determine the forward price.

2) After 30 days, the value of the bond in the previous example is $1,279. Draw a timeline and mark the following: initiation, today’s date, maturity, and coupon payment date.

3) Calculate the value of the forward contract on the bond to the long position.

Reference no: EM131972511

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