• Unless noted specifically in the question, all cash borrowing and lending rates are quoted per annum with continuous compounding.
• If the bond face value is not given, assume that it is $100.

Find the dollar duration of a forward contract with 2-year of maturity. At maturity, the forward contract delivers a 1-year to maturity annual-coupon bond with coupon rate of 3%. You are given the following term structure of spot rates:

R(0,1) = 3.3%

R(0,2) = 3.9%

R(0,3) = 4.4%

Assume continuous compounding. Do NOT assume parallel shift.

a) -$56.7776.

b) None of these.

c) $59.5839.

d) -$59.5839.

e) $56.7776.