Question: a. What is the 2-year forward price for a 1-year bond? b. What is the price of a call option that expires in 2 years,

a. What is the 2-year forward price for a 1-year bond?
b. What is the price of a call option that expires in 2 years, giving you the right to pay $0.90 to buy a bond expiring in 1 year?
c. What is the price of an otherwise identical put?
d. What is the price of an interest rate caplet that provides an 11% (effective annual rate) cap on 1-year borrowing 2 years from now?

Bond maturity (years) Bond price 1-year forward price volatility 0.9259 0.8495 0.7722 0.7020 0.1000 0.1050 0.1100

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