The instantaneous rate curve r(t) is given by 0.05 r(t) = 1+2exp(-(1+1)) Assume that interest is...
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The instantaneous rate curve r(t) is given by 0.05 r(t) = 1+2exp(-(1+1)²) Assume that interest is compounded continuously. (i) Compute the 6 months, 1 year, and 18 months discount factors with six decimal digits accuracy, and compute the 2 year discount factor with eight decimal digits accuracy, using Simpson's Rule; recall that the discount factor corresponding to time t is exp(- /*r(7) dr). (ii) Find the price of a two year semiannual coupon bond with coupon rate 5% (and face value 100). The instantaneous rate curve r(t) is given by 0.05 r(t) = 1+2exp(-(1+1)²) Assume that interest is compounded continuously. (i) Compute the 6 months, 1 year, and 18 months discount factors with six decimal digits accuracy, and compute the 2 year discount factor with eight decimal digits accuracy, using Simpson's Rule; recall that the discount factor corresponding to time t is exp(- /*r(7) dr). (ii) Find the price of a two year semiannual coupon bond with coupon rate 5% (and face value 100).
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