Suppose that all investors know with certainty that the short (6-months) interest rates for the future...
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Suppose that all investors know with certainty that the short (6-months) interest rates for the future 2 years will be as follows: Year 0 (today) 0.5 1 1.5 Short Interest Rate Tos = 0.50% ₁=2.20% = 3.00% r₂= 3.80% 25= 4.50% Given the information above, what is approximately the price of the 2-year maturity coupon bond with face value $1,000 and coupon rate 10% (paid semi-annually)? Suppose that all investors know with certainty that the short (6-months) interest rates for the future 2 years will be as follows: Year 0 (today) 0.5 1 1.5 Short Interest Rate Tos = 0.50% ₁=2.20% = 3.00% r₂= 3.80% 25= 4.50% Given the information above, what is approximately the price of the 2-year maturity coupon bond with face value $1,000 and coupon rate 10% (paid semi-annually)?
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To calculate the price of the 2year maturity coupon bond we need to discount the future cash flows c... View the full answer
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
Posted Date:
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