Suppose that on February 15, 1994 a firm wants to enter into a forward contract to purchase 5-year Treasuries, with coupon rate 6%, in two years (semi-annual coupons). Semi-annually compounded yield curve on 2/15/1994:
a) Compute the forward price.
b) What is the value of the contract at initiation?

Date Yield	Yield
2/15/1995	3.86%
8/15/1995	4.18%
2/15/1996	4.48%
8/15/1996	4.62%
2/15/1997	4.81%
8/15/1997	5.04%
2/15/1998	5.20%
8/15/1998	5.33%
2/15/1999	5.45%
8/15/1999	5.50%
2/15/2000	5.61%
8/15/2000	5.71%
2/15/2001	5.78%
8/15/2000	5.71%
2/15/2001	5.78%

Answer rating: 100% (QA)

a Forward Price The forward price can be computed using the spot rate and the forward points The spot rate is the current market interest rate for a s... View the full answer