Questions to be answered using the below problem: 
a. What financial concept or principle is the problem asking you to solve? 
b. In the context of the problem scenario, what are some business
decisions that a manager would be able to make after solving the
problem?
c. Is there any additional information missing from the problem that
would enhance the decision-making process?
d. Without showing mathematical calculations, explain in writing how
you would solve the problem.

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 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 yields (EAYs). a. What is the
forward price of your contract? (don't answer)
b. Suppose both the 1-year and 11-year spot rates unexpectely shift
downward by 2 percent. What is the price of a foward contract
otherwise identical to yours? (don't answer)

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Request for Question Clarification by leapinglizard-ga on 14 Oct 2005 20:20 PDT

Is this a school assignment?

Are you saying that only the first four subquestions a, b, c, d need
to be answered, and not the last subquestions a, b?

leapinglizard