Consider a one year forward contract whose underlying asset is a coupon paying bond with maturity date
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Question:
Consider a one year forward contract whose underlying asset is a coupon paying bond with maturity date beyond the expiration date of the forward contract. Assume that the bond pays coupon at the end of every June and December and the annual the coupon rate is 6%, and the face value of the bond is $100. Suppose now it is February 1st and the current market price of the bond is $93.2. Taking the annualized risk-free interest rate as 8%, find the forward price of this bond forward.
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