Question: Question 2 (7 marks) (a) A T-bill quote sheet has 90-day T-bill quotes with a 4.92% bid and a 4.86% ask. Face value of T-bill

Question 2 (7 marks) (a) A T-bill quote sheet has 90-day

Question 2 (7 marks) (a) A T-bill quote sheet has 90-day T-bill quotes with a 4.92% bid and a 4.86% ask. Face value of T-bill is $10,000. Calculate the purchase price and the bond equivalent yield of the T-bill. (4 marks) (b) Prices of zero-coupon bonds reveal the following pattern of forward rates: Years from now 0 1 2 1-year rate 5% 7% 8% (i) Calculate 2-year interest rate one year from now (ii) Calculate 2-year forward rate 2 years from now if the 4-year interest today is 7.8%

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