1. Consider an annual coupon bond with a face value of $100, 10 years to maturity, and a price of $93. The coupon rate on the bond is 6%. If you can reinvest coupons a rate of 2% per annum, then how much money do you have if you hold the bond to maturity?
2. Three months ago, you bought €2,000,000 1-year forward at the forward rate of 1.23 $/€. If current 9-month interest rates are 7% p.a. in the U.S. and 4% p.a. in the Eurozone, and the current spot exchange rate for euros is 1.18 $/€, then how much is your forward contract worth right now? If the forward contract were terminated today, would you expect to have to pay or receive this amount? Explain in detail how you arrived at your answer.