Question: There are four zero-coupon bonds each with face value 10 million. Bond A matures one year from today and is selling at 9,433,962.26. Bond B

There are four zero-coupon bonds each with face value 10 million. Bond A matures one year from today and is selling at 9,433,962.26. Bond B matures two years from today and is selling at 8,573,388.20. Bond C matures three years from today and is selling at 7,117,802.48. Bond D matures four years from today at is selling at 5,717,532.46.

i: Calculate the yield to maturity of Bond B and that of Bond C.

ii: Calculate the one-year implied forward rate at the end of year 1 and at the end of year 3.

iii:What is the usefulness of convexity when duration is used to measure interest rate risk?

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