Why should I choose AnalystNotes?
AnalystNotes specializes in helping candidates pass. Period.
Basic Question 3 of 3
An investor bought a bond when it was originally issued with a maturity of 30 years. The bond pays semi-annual coupons of $60. The first coupon occurs 181 days after issue, the second 365 days, the third 547 days, and the fourth 730 days. It is now 120 days into the life of the bond and its price is $1,012.85 (including accrued interest). The investor wants to sell the bond two days after its fourth coupon. The risk-free rate is currently 7 percent. At what price could the investor enter into a forward contract to sell the bond two days after its fourth coupon?
User Contributed Comments 4
| User | Comment |
|---|---|
| AWR24 | Good question |
| bodduna | nice |
| jperez049 | Hi, what about the accrued coupon of 2 days corresponding to the 5th coupon payment? Should it not be added to the Forward price? $60 x 2/180 |
| JNW1980 | how are you supposed to do a question like this in 3 minutes? |
I was very pleased with your notes and question bank. I especially like the mock exams because it helped to pull everything together.
Martin Rockenfeldt
Learning Outcome Statements
describe how fixed-income forwards and futures are priced, and calculate and interpret their no-arbitrage value;
CFA® 2025 Level II Curriculum, Volume 5, Module 31.