1. Suppose we have the following annual risk-free bonds Maturity Price Coupon Rate YTM 1 98...
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1. Suppose we have the following annual risk-free bonds Maturity Price Coupon Rate YTM 1 98 0% 2.04% 2 101 3% 2.48% 3 103 4% 2.94% 4 101 2% 1.73% 5 103 5% 4.32% a) Find the zero rates for all 5 maturities. Note: for an extra challenge, try using linear algebra to find := Ap where [98 0 0 0 0 A=4 26 3 103 0 2 5 4 5 104 925 6005 0 0 102 0 105 1 b) Suppose we have a risk-free security which pays cash flows of $10 in one year, $25 in two years, and $100 in four years. Find its price. 1. Suppose we have the following annual risk-free bonds Maturity Price Coupon Rate YTM 1 98 0% 2.04% 2 101 3% 2.48% 3 103 4% 2.94% 4 101 2% 1.73% 5 103 5% 4.32% a) Find the zero rates for all 5 maturities. Note: for an extra challenge, try using linear algebra to find := Ap where [98 0 0 0 0 A=4 26 3 103 0 2 5 4 5 104 925 6005 0 0 102 0 105 1 b) Suppose we have a risk-free security which pays cash flows of $10 in one year, $25 in two years, and $100 in four years. Find its price.
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a Finding the zero rates for all 5 maturities To find the zero rates we can use the bond prices and ... View the full answer
Related Book For
Managerial Economics and Strategy
ISBN: 978-0321566447
1st edition
Authors: Jeffrey M. Perloff, James A. Brander
Posted Date:
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