Given the following information from the market: the six-month risk-free interest rate is 2% (for six months);
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Given the following information from the market: the six-month risk-free interest rate is 2% (for six months); the YTM of a one-year risk-free bond with 8% coupon rate (APR) and semiannual coupons is 6% (APR); the YTM of a two-year risk-free bond with 10% coupon rate and annual coupons is 5%. Calculate: the two-year risk-free interest rate (expressed as an EAR). Please don't copy from previous solution and provide full calculation and explanation.
Related Book For
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
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