In a particular bond market, thetwo - year par yield at time t = 0is 4.15% and the issue price attime t = 0 of a two - year fixedinterest stock, paying coupons of8% annually in arrears and redeemed at 98, is $105.40 per$100 nominal. Calculate: (a) theone - year spot rate (b) the two -year spot rate

In a particular bond market, thetwo - year par yield at time t = 0is 4.15% and the issue price attime t = 0 of a two - year fixedinterest stock, paying coupons of8% annually in arrears and redeemed at 98, is $105.40 per$100 nominal. Calculate: (a) theone - year spot rate (b) the two -year spot rate

Principles Of Marketing

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

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Step 1: Given Information:

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Step 2: Explanation to derive to final answers:(a) One-year spot rate

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Step 3: Calculate the present value of redemption price:

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Step 4: Calculate the market price of the bond:

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Step 5: Calculating (b) the two -year spot rate

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Step 6: Present Value of Redemption:

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Step 7: Spot Rate:

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