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    dratewka2's Avatar
    dratewka2 Posts: 2, Reputation: 1
    New Member

    Nov 10, 2013, 04:46 PM
    Help with Finance Problem - Forward Contract/Coupon Bonds
    Hi I've been working on a finance review for my exam and I can't seem to figure this question out hope someone can shed some light.

    In the table below you find prices on zero coupon bonds with j years to maturity.
    j 1 2 3 4
    Bj 95 90 84 78

    a) You need to borrow $100 million in two years. Since you are uncertain about future interest rates, you want to get into a forward contract to borrow $100 million two years from now for two years in the form of a discount loan. How would you construct such a forward contract?

    b) How can you calculate the duration of a bond that pays $10 next year as well as every year after that in perpetuity? Explain.

    Any help or first steps would be appreciated!
    alanserhan's Avatar
    alanserhan Posts: 1, Reputation: 1
    New Member

    Oct 31, 2014, 02:38 AM

    I actually have the same problem. Did you find out any solution? I really appretiate if you have an answer you want to share.

    Best Regards

    Alan from Norway.

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