For the problem found below, answer the following questions:
1. What financial concept or principle is the problem asking to solve?
2. In the context of the problem scenario, what are some business
decisions that a manager would be able to make after solving the
problem?
3. Is there any additional information missing from the problem that
would enhance the decision-making problem?
4. Without showing mathematical calculations, explain in writing how
you would solve the problem.

You enter into a forward contract to buy a 10-year, zero coupon bond
that will be issued in one year. The face value of the bond is $1,000,
and the 1-year spot interest rates are 4% per annum and 9% per annum,
respectively.  Both of these interest rates are expressed as effective
annual yields.
a) What is the forward price of your contract?
b) Suppose both the 1-year and 11-year spot rates unexpectedly shift
downward by 1%. What is the price of a forward contract otherwise
identical to yours?

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Clarification of Question by lrdgz-ga on 18 Sep 2005 14:42 PDT

I would appreciate all you can do to expedite your response to me -
preferably within the next couple of hours.  I will make it worth your
while in a tip!  Thanks in advance.