This exercise uses the data in Table 6.9. 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:
(a) Compute the forward price.
(b) What is the value of the forward contract at initiation?
(c) Compute the value of the forward contract on each of the next five days.
(d) Assume the firm and the counterparty mark to market the forward contract; describe the cash flows between the counterparties over time.
(e) Panel B contains overnight rates. Compute the total profit / loss on the contract after two, three, four, and five days.

Panel A: Yeld Curves Date 2/15/1994 2/16/1994 2/171994 2/18/1994 2/22/1994 2/23/1994 5/15/1994 3.57% 3.69% 3.81% 4.32% 3.15% 8/15/1994 3.59% 3.59% 3.71% 3.55% 3.49% 11/15/1994 3.80% 2/15/1995 3.86% 3.89% 3.92% 4.08% 4.07% 5/15/1995 4.01% 4.03% 4.05% 4.12% 4.2 8/15/1995 4,18% 11/15/1995 4,27% 4,29% 2/15/1996 4.48% 4.48% 4.56% 4.55% 4.65% 5/15/1996 4,58% 8/15/1996 4.62% 4.62% 11/15/1996 4.76% 4.77% 4.86% 4.90% 4.90% 2/15/1997 4.81% 4.81% 4.89% 4.94% 4.92% 5/15/1997 4.95% 4.96% 5,04% 5.11% 5.00% 8/15/1997 5.04% 5.04% 5.13% 5.19% 11/15/1997 5.14% 5.13% 5.22% 5.29% 5.29% 2/15/1998 5.20% 5/15/1998 5.25% 5.25% 5.36% 5.43% 5.41% 8/15/1998 5.33% 5.34% 5.45% 5.53% 5.50% 11/15/1998 5.38% 5.38% 5.50% 5.56% 5.54% 2/15/1999 5.45% 5.45% 5.57% 5.63% 5.61% 5/15/1999 5.49% 5.50% 5.61% 8/15/1999 5.50% 11/15/1999 557% 2/15/2000 5.61% 5.61% 5.71% 5/15/2000 5.65% 5.66% 5.76% 8/15/2000 5.71% 5.72% 5.82% 11/15/2000 5.76% 5.77% 5.87% 6.01% 5.94% 2/15/2001 5.78% 5/15/2001 5.83% 5.84% 5.95% 6.03% 6.03% 8/15/2001 5.85% 5.88% 5.96% 11/15/2001 5.92% 5.94% 3.15% 3.54% 3.84% 3.70% 3.72% 3.66% 449% 4.36% 4.44% 4.59% 4.75% 4.83 4.81 %. 5.00% 4.18% 4.24% 4.36% 4.32% 4.43% 4.34% 4.45% 465% 4.70% 4.58% 4,71% 4.75% 4.73% 5.1 8% 5.27% 5.19% 5.30% 5.37% 5,50% 5.58% 5.62% 5.70% 5.74% 5.75% 5.66% 5.66% 5.50% 5.56% 5.62% 5.68% 5.68% 5.76% 5.80% 5.85% 5.91% 5.80% 5.84% 5.90% 5.87% 5.91% 5.93% 6,03% 6.04% 6.11% 6.1 5% 6.21% 5.81% 5.92% 5.99% 5.96% 6.07% 0.13% 6.08% 6.13% 6.03% Panel B: Overnight Rates 2/16/1994 2/17/1994 2/18/1994 2/22/1994 2/23/1994 3.54% 3.78% 3.90% 4.44% 2.88%