The following information about bond prices are provided:
|
Maturity (in years) |
Coupon Rate (p.a. semi-annual compounding) |
Bond Price |
|
0.5 |
0 |
$99.50 |
|
1.0 |
4% |
$102.50 |
|
1.5 |
8% |
$109.00 |
|
2.0 |
4% |
$100.00 |
(All bonds have a face value of $100. Coupon rates are expressed with semi-annual compounding)
Required:
(a) Calculate the continuously compounded zero rates for the bonds above. Record your answers to 3 decimal places in percentage i.e. x.xxx% or 0.xxxxx.
(b) What are the forward rates for the periods: 6 months to 12 months, 12 months to 18 months, 18 months to 24 months?
(c) Use the zero rates you calculated from part (a) to estimate the price of a two-year bond providing a semi-annual coupon of 7% per annum and a face value of $100.
Enjoy 24/7 customer support for any queries or concerns you have.
Phone: +1 213 3772458
Email: support@gradeessays.com