Illustrate what is the price of a forward contract

Assignment Help Macroeconomics
Reference no: EM1332927


Description of Forward contract

You enter into a forward contract to buy a 10-year, zero coupon bond that will be iussued in one year. The face value of the bond is $1000, and the 1-year and 11-year spot interest rates are 3 percent per annum and 8 percent per annum, respectively. Both of these interest rates are expressed as effective annual yiels (EAY's).

a) What is the forward price of your contract?

b) Suppose both the 1-year and 11-year spot rates unexpectedly shift downward by 2 percent. What is the price of a forward contract otherwise identical to yours?

Please show the mathematical calculations

 

Reference no: EM1332927

Questions Cloud

Discussing the case of breach of duty : The employee was caught; however, he has subsequently spent the money and it cannot be recovered. Has this director breached any of his director's duty as a result?
Pros and cons of working with multiple tables : express pros and cons of working with multiple tables.
Process for turning a job analysis : The process for turning a job analysis into a position description and the legal requirements for position descriptions
Driving influences affect the decision-making of consumers : What are driving influences that affect the decision-making of consumers? Can you illustrate an example in which senior men or women are influenced by a product?
Illustrate what is the price of a forward contract : Assume both the 1-year and 11-year spot rates unexpectedly shift downward by 2 percent. Illustrate what is the price of a forward contract otherwise identical to yours.
Explain external constraints when starting an e-business : Explain What are the external constraints when starting an e-Business
Determine this strategy from an ethical perspective : Important information about Staffing - Determine this strategy from an ethical perspective.
Create application for an "automotive repair shop" : Create Visual Basic.NET application for an "Automotive Repair Shop". Below are the needed.
Market risk premium under capm : Analysts give Proctor & Gamble, the consumer products firm, an equity beta of 0.65. The risk-free rate is 4.0 percent. What market risk premium is she assuming?

Reviews

Write a Review

Macroeconomics Questions & Answers

  Comparative advantage and terms of trade

Suppose two nations are considering specializing in either calculators or personal computers. If solely producing calculators, country A can produce 300 and country B can produce 400.

  Illustrate role do property rights play in creating common

Illustrate role do property rights play in creating common property resources? Why are common property resources subject to market failure due to nonexcludability.

  Business if it was done by trade associations-certification

Business if it was done by trade associations, certifications, and professional societies.

  Students explore the reasons behind regulating banks

In the particular assignment due this week, students explore the reasons behind regulating banks also how that regulation relates.

  Utility maximization point subject

Suppose that there are two goods in the economy, and the price of each good is equal to 1. When Alice has income of $10, She consumes 1 unit of good y and 9 units of good r.

  Deciding about factory lease and quantity of output

Suppose the firm decided to lease the large factory, and has put down a non-refundable deposit of 4,000 for that factory. Provide a recommendation concerning which factory firm should lease, and the number of boxes of chalk it should produce.

  Compute same after the osha guidelines have been met

Compute same after the OSHA guidelines have been met. Who pays the economic burden of meeting OSHA guidelines.

  Different situations according solow growth model

Assume that the economy starts in steady state. According to the Solow growth model, how would each of the following affect consumption per worker in the long run, Explain?

  Impact of ban on credit cards on money supply

Credit cards are sometimes discussed as a public problem. In 2001, purchases on credit cards accounted for 21% of consumer spending in America, which has the lowest savings rate of any big country.

  Describe the expected amount of dollars to be paid

Describe the expected amount of dollars to be paid by the Wake Forest Co. for the pesos in one year.

  Illustrate what is number of kilowatt hours of electricity

Illustrate what is the number of kilowatt hours of electricity produced and what is the price that the company will charge.

  True or false question of macroeconomics

Answer whether the following statements are true or false, explaining your answer in each case.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd