What is the value of the original forward contract now

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Reference no: EM13721833

Consider a long position in a 6-month forward contract on a 1-year coupon bond with a 8% quarterly coupon. (Note: The bond has 1-year to maturity as of t=0). Assume a face value of $1 million. Use the discount factors for August 15, 2000 in Table 5.9 to find the forward price at t=0. Assume delivery would occur just after the coupon at t=0.5 has been made. Now assume that 3-months have gone by (i.e. it is now November 15, 2000).See table 5.9 for the Nov. 15th discount factors. What is the value of the original forward contract now?

Table 5.9

Maturity z(0,t)

0.25 0.9844

0.50 0.9690

0.75 0.9531

1.00 0.9386

Reference no: EM13721833

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