Problem $6\mathrm{.}13.$

Suppose that the nine$-$month LIBOR interest rate is $8\%$ per annum and the six$-$month LIBOR interest rate is $7\mathrm{.}5\%$ per annum $($both with actual $\frac{?}{365}$ and continuous compounding$).$ Estimate the three$-$month Eurodollar futures price quote for a contract maturing in six months.

Probl$$m $6\mathrm{.}14.$

A five$-$year bond with a yield of $11\%($continuously compounded$)$ pays an $8\%$ coupon at the end of each year.

a$)$ What is the bond's price?

b$)$ What is the bond's duration?

c$)$ Use the duration to calculate the effect on the bond's price of a $0\mathrm{.}2\%$ decrease in its yield.

d$)$ Recalculate the bond's price on the basis of a $10\mathrm{.}8\%$ per annum yield and verify that the result is in agreement with your answer to $($c$).$

Chapter $7$ Problem set #$6$

Problem $7\mathrm{.}8.$