1- The six-month and one-year zero rates are both 10% per annum. For a bond that has a life of 18 months and pays a coupon of 8% per annum (with semiannual payments and one having just been made), the yield is 10.4% per annum. What is the bond's price? What is the 18-month zero rate? All rates are quoted with semiannual compounding.
1- The six-month and one-year zero rates are both 10% per annum. For a bond that has a life of 18 months and pays a coupon of 8% per annum (with semiannual payments and one having just been made), the yield is 10.4% per annum. What is the bond's price? What is the 18-month zero rate? All rates are quoted with semiannual compounding.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:1- The six-month and one-year zero rates are both 10% per
annum. For a bond that has a life of 18 months and pays a
coupon of 8% per annum (with semiannual payments and
one having just been made), the yield is 10.4% per
annum. What is the bond's price? What is the 18-month
zero rate? All rates are quoted with semiannual
compounding.
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