A xed interest security that currently has a remaining term of 15 years pays coupons of 8%

A fixed interest security that currently has a remaining term of 15 years pays coupons of 8% per annum half-yearly in arrear and is redeemable at par. An investor, not subject to tax, negotiates a forward contract in which he agrees to buy 100,000 nominal of the security in six years' time. The gross redemption yield of the fixed interest security is currently 7% per annum and the risk-free force of interest is assumed to be 6% per annum over next 10 years. Calculate the forward price of the contract.

Answer rating: 100% (QA)

Fixed Interest solurty n15 r 89 12 ... View the full answer