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aquinnah | 05:04 Mon 30th Apr 2007 | Business & Finance
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You enter into a forward contract to buy a 10 year zero-coupon bond that will be issued in one year. The face value of the bond is $1,000 and the 1 - yer and # - year s[pt omterst rates are 4% per annum and 9% per annum respectively. Both of these interest rates are expressed as effective annual yields (EAYs).
a. What is the forward price of your contract?
b. Suppose both the spot rates unexpectedly shift downward by 1%. What is the price of a forward contract otherwise identical to yours?

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