Consider a 2-year bond whose par value is $1,000 and coupon rate is 6% per year, payable
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Question:
- Consider a 2-year bond whose par value is $1,000 and coupon rate is 6% per year, payable semi-annually. The bond's current price is $1,007.91. Suppose also thatthe current term structure of spot interestrates is as follows:
Term (years) | Rate (% p.a., continuous compounding) |
0.50 | 4.445% |
1.00 | 4.740% |
1.50 | 5.060% |
Under the Unbiased Expectation Hypothesis, how much do you expect the six-monthspot rate to be in 18 months from now?
Related Book For
Accounting for Governmental and Nonprofit Entities
ISBN: ?978-0073379609
15th Edition
Authors: Earl R. Wilson, Jacqueline L Reck, Susan C Kattelus
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