Forward Pricing of Government Bond

Alice is evaluating a forward price on a government bond with a coupon rate of 3% that matures in 5 years. The current yield on similar bonds is 4%. To calculate the forward price, Alice notes that the bond has a face value of $1,000 and pays coupons annually. She needs to determine the appropriate forward price for a contract that will mature in one year.

Using the formula for the forward price of a bond, Alice must consider the present value of the future cash flows including both the coupon payments and the face value of the bond at maturity.