17. You have three zero coupon bonds with the following market prices: Bond A for $97.087, Bond B for $93.804 and Bond C for $89.765, and all three has a face value of $100. Bond A has a maturity of 1 year, Bond B has one of 2 years, while Bond C is going to terminate in 3 years. What is the 2-year forward rate (i.e. the expected spot rate" 2 years from now on) on the market based on these conditions? a. it is 3.80%; b. it is 4.81%; C. it is 4.43%; d. it is 4.50%; e. it is 4.60%.
17. You have three zero coupon bonds with the following market prices: Bond A for $97.087, Bond B for $93.804 and Bond C for $89.765, and all three has a face value of $100. Bond A has a maturity of 1 year, Bond B has one of 2 years, while Bond C is going to terminate in 3 years. What is the 2-year forward rate (i.e. the expected spot rate" 2 years from now on) on the market based on these conditions? a. it is 3.80%; b. it is 4.81%; C. it is 4.43%; d. it is 4.50%; e. it is 4.60%.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:17. You have three zero coupon bonds with the following market prices: Bond A for $97.087,
Bond B for $93.804 and Bond C for $89.765, and all three has a face value of $100. Bond
A has a maturity of 1 year, Bond B has one of 2 years, while Bond C is going to terminate
in 3 years. What is the 2-year forward rate (i.e. the expected spot rate" 2 years from
now on) on the market based on these conditions?
a. it is 3.80%;
b.
it is 4.81%;
c.
it is 4.43%;
d. it is 4.50%;
e. it is 4.60%.
535
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