available: Maturity 0.5 1.5 1.5 2.0 Coupon Rate 0% 8% 0% 0% Imagine that currently in...
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available: Maturity 0.5 1.5 1.5 2.0 Coupon Rate 0% 8% 0% 0% Imagine that currently in the market the following bonds are Price $ 97.087 $101.120 $89.900 $ 84.663 Maturity is in years, coupons are paid semiannually but quoted annually on a bond equivalent basis, and prices are quoted per $100 face value. (a) Construct a 2-year spot yield curve from this information. More precisely, calculate a spot rate for each six-month period. Report the rate on a bond equivalent basis. (b) In six months, your company plans to issue a 1.5-year zero coupon bond with a face value of $500,000 to finance a small acquisition. If the traditional expectations theory of the term structure is correct, and if the risk of your company's bonds is similar to that of the above bonds, what is the expected price of your company's bond at issue (i.e., in six months)? available: Maturity 0.5 1.5 1.5 2.0 Coupon Rate 0% 8% 0% 0% Imagine that currently in the market the following bonds are Price $ 97.087 $101.120 $89.900 $ 84.663 Maturity is in years, coupons are paid semiannually but quoted annually on a bond equivalent basis, and prices are quoted per $100 face value. (a) Construct a 2-year spot yield curve from this information. More precisely, calculate a spot rate for each six-month period. Report the rate on a bond equivalent basis. (b) In six months, your company plans to issue a 1.5-year zero coupon bond with a face value of $500,000 to finance a small acquisition. If the traditional expectations theory of the term structure is correct, and if the risk of your company's bonds is similar to that of the above bonds, what is the expected price of your company's bond at issue (i.e., in six months)?
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Related Book For
Essentials Of Investments
ISBN: 9780073368719
7th Edition
Authors: Zvi Bodie, Alex Kane, Alan J. Marcus
Posted Date:
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