Question: PLEASE DO NOT ANSWER UNLESS YOU CAN EXPLICITLY EXPLAIN how & why you determined the values for rate and number of years in the PV

PLEASE DO NOT ANSWER UNLESS YOU CAN EXPLICITLY EXPLAIN how & why you determined the values for rate and number of years in the PV formula. I am confused because it is a 15 year bond, but a 10 year spot rate is provided.

You have entered into a forward contract with the following parameters: Bond: 15 year, zero coupon bond Issuance: Will be issued in 1 year Face Value: $1000 1 year spot rate: 2 pct. 10 year spot rate: 4 pct.

Solve for forward price. Answer is one of the following choices: A) $533.91 B) $566.37 C) $544.59

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