Question: A xed interest security that currently has a remaining term of 15 years pays coupons of 8% per annum half-yearly in arrear and is redeemable

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.

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