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Help with Finance Problem - Forward Contract/Coupon Bonds
Any help would be appreciated stuck on my exam review! Will rep you for sure :D
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. |
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