Question: Consider the zero rates (continuously-compounded) and cash flows for a bond in the table below: What is the theoretical price of the bond? What is

Consider the zero rates (continuously-compounded) and cash flows for a bond in the table below:

What is the theoretical price of the bond?

What is the bond yield?

What is the implied forward rate between year 1 and year 1.5?

What is the implied forward rate between year 1 and year 2?

Maturity (Years)

Zero Rates

Coupon Payments

Principal

0.5

2.0%

$10

-

1.0

2.3%

$15

-

1.5

2.7%

$10

-

2.0

3.2%

$15

$1000

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