Given the following table below for the Par Bond Yield Curve, lind the following Note that the
Question:
Given the following table below for the Par Bond Yield Curve, lind the following Note that the 1-year Bond is also a Zero Coupon Bond in addition to baing a 1 -year Coupon Bond. The Par Value for these bonds are all $100 . Thus. you are ghen the 1-year Spot Rate is 2 th to start things ofl free. Note all these bonds are US Treasury Bonds with no credit of default risk.
a. What is the Coupon rate, Veld to Maturity Current Yield for the 3-year Par Bond.
b. Find the Spot Rates for 2-yoar, 3-year, and 4-year Zero Coupon Bonds.
c. Find ail the possible forward rales along this yield curve.
d. Assume an investment House is willing to offer Zero Coupon Bonds priced at Spot Rates that can be calculated from the Par Bond Yield Curve: In addition, someone offered you simple loan (same as a Zero) of 1 million dollars 4 years at a Spot Rate of 3% . Explain how to take advantage of this offer.
Basic Business Statistics Concepts And Applications
ISBN: 9780132168380
12th Edition
Authors: Mark L. Berenson, David M. Levine, Timothy C. Krehbiel