Question: Please solve number 2 Problem 1 (7 points): A risk-free 1-year 20% coupon bond has YTM=8% while a risk-free 1- year 5% coupon bond has
Please solve number 2
Problem 1 (7 points): A risk-free 1-year 20% coupon bond has YTM=8% while a risk-free 1- year 5% coupon bond has YTM=8.2%. Find the price of a 6-month 14% coupon bond. Assume you can freely buy or sell these bonds. Problem 2 (3 points): Assume you know YTM for 20 different bonds. All these bonds mature 10 years from now and all have different coupon rates. Will you be able to find a price of a bond maturing 6 months from now? If yes, explain how would you do so. If not, explain why. You must provide a valid detailed explanation an answer without correct explanation will receive zero marks. Problem 1 (7 points): A risk-free 1-year 20% coupon bond has YTM=8% while a risk-free 1- year 5% coupon bond has YTM=8.2%. Find the price of a 6-month 14% coupon bond. Assume you can freely buy or sell these bonds. Problem 2 (3 points): Assume you know YTM for 20 different bonds. All these bonds mature 10 years from now and all have different coupon rates. Will you be able to find a price of a bond maturing 6 months from now? If yes, explain how would you do so. If not, explain why. You must provide a valid detailed explanation an answer without correct explanation will receive zero marks
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