Question: Using the information in Table 15.5, suppose we have a bond that pays one barrel of oil in 2 years. a. Suppose the bond pays

Using the information in Table 15.5, suppose we have a bond that pays one barrel of oil in 2 years.

a. Suppose the bond pays a fractional barrel of oil as an interest payment after 1 year and after 2 years, in addition to the one barrel after 2 years. What payment would the bond have to make in order to sell for par ($20.90)?
b. Suppose that the oil payments are quarterly instead of annual. How large would they need to be for the bond to sell at par?

TABLE 15.5 Table for problems. Quarter 6 Oil forward price () 210 2. 208 20.5 20. 20.0 19.9 19.8 Zero-coupon bond 0.9852 0.970 0.9546 0.9388 023 0.9075 0.8919 0.8763 price (S)

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