Todays zero-rate curve is summarized in the table below. Time period (years) Zero rate% p.a. 0.5 5.755
Fantastic news! We've Found the answer you've been seeking!
Question:
Today’s zero-rate curve is summarized in the table below.
Time period (years) | Zero rate% p.a. |
0.5 | 5.755 |
1.0 | 6.250 |
1.5 | 6.455 |
2.0 | 6.555 |
2.5 | 6.600 |
3.0 | 6.610 |
Calculate the price (per $100 par value), to three decimal places, of a three-year fixed-coupon bond paying a coupon rate of 9% pa if the bond pays coupons every half year. Assume that the bond is default-free and that a coupon has just been paid -- that is, price the bond on an ex-interest basis.
Hint: find the bond price as the present value of its future cash flows, using the discount factors retrieved from the zero-rate curve.
Related Book For
Business Forecasting with ForecastX
ISBN: 978-0073373645
6th edition
Authors: Holton wilson, barry keating, john solutions inc
Posted Date: