We have the following option-free bonds which we assume are accurately priced: Bond equivalent yield Market...

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We have the following option-free bonds which we assume are accurately priced: Bond equivalent yield Market Value 3.80% 4.10% Maturity 6 months 1 year 18 months 2 years 4.50% 5.00% Z₂₁ Z₂ Z₁ Za $100 $100 1. Use the boostrapping technique to find the four zero-coupon spot rates (2₁-24) (remember that the first two spot rates are determined using the zero-coupon bills issued one year and shorter). ZERO-COUPON SPOT RATE $100 $100 IMPLIED FORWARD RATE 1F₁ 1F₂ 1F3 2. Find the three implied forward 6-month interest rates (ifi-fa) bond equivalent yield (make sure your answer is an annualized 6 month rate). 3. Using 6-month spot rate and the rates you calculated in (2) above, what should be the correct price for a similar option-free bond which matures in 2 years and has a 6.0% coupon rate? 4. What is the yield to maturity for the bond in (3)? We have the following option-free bonds which we assume are accurately priced: Bond equivalent yield Market Value 3.80% 4.10% Maturity 6 months 1 year 18 months 2 years 4.50% 5.00% Z₂₁ Z₂ Z₁ Za $100 $100 1. Use the boostrapping technique to find the four zero-coupon spot rates (2₁-24) (remember that the first two spot rates are determined using the zero-coupon bills issued one year and shorter). ZERO-COUPON SPOT RATE $100 $100 IMPLIED FORWARD RATE 1F₁ 1F₂ 1F3 2. Find the three implied forward 6-month interest rates (ifi-fa) bond equivalent yield (make sure your answer is an annualized 6 month rate). 3. Using 6-month spot rate and the rates you calculated in (2) above, what should be the correct price for a similar option-free bond which matures in 2 years and has a 6.0% coupon rate? 4. What is the yield to maturity for the bond in (3)?

Answer rating: 100% (QA)

Here are the calculations Zerocoupon spot rates Z1 380 given 6month rate Z2 1Z122 1 410 ... View the full answer