assume that forward rates for the next 2 years are given by: r(0.5)=6%, r(1)=7%; r(1.5)=8% and r(2)=9%. In addition, the price of a 7% coupon bond maturing 2.5 years from now is equal to $101 and the price of a 6% coupon bond maturing 3 years from now is equal to $99 (c) Find the 2.5-year spot rate r (2.5). Keep at least 6 decimal digits while doing calculations and reporting the answer. d) Find the 3-year forward rate r(3). Keep at least 6 decimal digits while doing calculations and reporting the answer.
assume that forward rates for the next 2 years are given by: r(0.5)=6%, r(1)=7%; r(1.5)=8% and r(2)=9%. In addition, the price of a 7% coupon bond maturing 2.5 years from now is equal to $101 and the price of a 6% coupon bond maturing 3 years from now is equal to $99 (c) Find the 2.5-year spot rate r (2.5). Keep at least 6 decimal digits while doing calculations and reporting the answer. d) Find the 3-year forward rate r(3). Keep at least 6 decimal digits while doing calculations and reporting the answer.
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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assume that forward rates for the next 2 years are given by: r(0.5)=6%, r(1)=7%; r(1.5)=8% and r(2)=9%. In addition, the price of a 7% coupon bond maturing 2.5 years from now is equal to $101 and the price of a 6% coupon bond maturing 3 years from now is equal to $99
(c)
Find the 2.5-year spot rate r (2.5). Keep at least 6 decimal digits while doing calculations and reporting the answer.
d) Find the 3-year forward rate r(3). Keep at least 6 decimal digits while doing calculations and reporting the answer.
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