The following information relates to a forward contract written on a bond: Bond price = $95 Maturity = 1 year Coupon 1, paid in 6 months = $3; Coupon 2. paid immediately prior to maturity of forward = $2 Riskless rate of interest = 5% What is the forward price? A $94.43 B $85.77 $94.79 D $93.79

The following information relates to a forward contract written on a bond: Bond price = $95 Maturity = 1 year Coupon 1, paid in 6 months = $3; Coupon 2. paid immediately prior to maturity of forward = $2 Riskless rate of interest = 5% What is the forward price? A $94.43 B $85.77 $94.79 D $93.79

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter10: Long-term Liabilities

Section: Chapter Questions

Problem 10.1E

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Question

The following information relates to a forward contract written on a bond:
Bond price = $95
Maturity = 1 year
Coupon 1, paid in 6 months = $3; Coupon 2, paid immediately prior to maturity of forward = $2
Riskless rate of interest = 5%
What is the forward price?
A) $94.43
B $85.77
c) $94.79
D) $93.79

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