Question: Use the data in the following table, determine the zero rates for maturities of 6 months, 1 year, and 18 months expressed in terms of

Use the data in the following table, determine the zero rates for maturities of 6 months, 1 year, and 18 months expressed in terms of continuous compounding. Bond 2 and 3 have semiannual coupon payments.

Bond Number Bond Principal Time to Maturity (years) Annual Coupon Bond Price
1 100 0.5 0 97
2 100 1.0 7 102
3 100 1.5 9 103

Please fill in the following table and show your work.

Time (years) Annual Zero Rate (continous compounding)
0.5
1.0
1.5

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