QUESTION TWO ()You are given the following information Year Lyear forward rate 5.8% 71% 7.3% 7.4% Required What should be the purchase price of a two year zero coupon bond if it is purchased at the beginning of year 2 and has a face value of sh. 1,000? 13 marks) Gi) What would the yield to maturity be on a four year zero coupon bond purchased today? 13 marks] Calculate the price at the beginning of year 1 of a 10% annual coupon bond with face value of Sh.1,000 and 5 years to maturity (iii) I5 marks] What should be the holding period return of a 9% annual coupon bond with face value of sh. 1,000 and five years to maturity if it is purchased at the beginning of year 1 and sold at the beginning of year 2, assuming that rates do not change? (iv) b) Consider two annual coupon bonds, each with two years to maturity. Bond A has 7% coupon and a price of sh. 1,000.62 Bond B has a 10% coupon and sells for sh.1055.12. Find the two one period forward rates that must hold for these bonds. QUESTION TWO ()You are given the following information Year Lyear forward rate 5.8% 71% 7.3% 7.4% Required What should be the purchase price of a two year zero coupon bond if it is purchased at the beginning of year 2 and has a face value of sh. 1,000? 13 marks) Gi) What would the yield to maturity be on a four year zero coupon bond purchased today? 13 marks] Calculate the price at the beginning of year 1 of a 10% annual coupon bond with face value of Sh.1,000 and 5 years to maturity (iii) I5 marks] What should be the holding period return of a 9% annual coupon bond with face value of sh. 1,000 and five years to maturity if it is purchased at the beginning of year 1 and sold at the beginning of year 2, assuming that rates do not change? (iv) b) Consider two annual coupon bonds, each with two years to maturity. Bond A has 7% coupon and a price of sh. 1,000.62 Bond B has a 10% coupon and sells for sh.1055.12. Find the two one period forward rates that must hold for these bonds