3.5 The following table gives the prices of four bonds. Bond # Bond Principal ($) 1 100 2 100 3 100 4 100 *: Half of the stated coupon is paid every six months. (a) Calculate the zero rates for maturities of 6 months, 12 months, 18 months, and 24 months. (b) What are the forward rates for the 6-month periods: months 7 to 12, months 13 to 18, months 19 to 24? (c) What are the 6-month, 12-month, 18-month, and 24-month par yields for bonds that provide semiannual coupon payments? (d) Estimate the price and yield a two-year bond providing a semiannual coupon of 7% per annum. Time to Maturity (years) 0.5 1.0 1.5 2.0 Annual Coupon ($)* 0.0 0.0 6.2 8.0 Bond Price ($) 98 95 101 104
3.5 The following table gives the prices of four bonds. Bond # Bond Principal ($) 1 100 2 100 3 100 4 100 *: Half of the stated coupon is paid every six months. (a) Calculate the zero rates for maturities of 6 months, 12 months, 18 months, and 24 months. (b) What are the forward rates for the 6-month periods: months 7 to 12, months 13 to 18, months 19 to 24? (c) What are the 6-month, 12-month, 18-month, and 24-month par yields for bonds that provide semiannual coupon payments? (d) Estimate the price and yield a two-year bond providing a semiannual coupon of 7% per annum. Time to Maturity (years) 0.5 1.0 1.5 2.0 Annual Coupon ($)* 0.0 0.0 6.2 8.0 Bond Price ($) 98 95 101 104
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:3.5 The following table gives the prices of four bonds.
Bond Principal ($)
Time to Maturity (years)
1
100
0.5
2
100
1.0
3
100
1.5
4
100
2.0
*: Half of the stated coupon is paid every six months.
(a)
Calculate the zero rates for maturities of 6 months, 12 months, 18 months, and 24 months.
(b) What are the forward rates for the 6-month periods: months 7 to 12, months 13 to 18, months
19 to 24?
Bond #
Annual Coupon ($)*
0.0
annum.
0.0
6.2
8.0
Bond Price ($)
98
95
101
104
(c) What are the 6-month, 12-month, 18-month, and 24-month par yields for bonds that provide
semiannual coupon payments?
(d) Estimate the price and yield of a two-year bond providing a semiannual coupon of 7% per
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