Maturity Price 25 September 2022 99.7985 25 March 2023 98.3855 (a) What are appropriate discount factors for 2 months and 8 months? (b) What are the spot rates, with semi-annual compounding, for 2 months and 8 months?
Maturity Price 25 September 2022 99.7985 25 March 2023 98.3855 (a) What are appropriate discount factors for 2 months and 8 months? (b) What are the spot rates, with semi-annual compounding, for 2 months and 8 months?
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
Problem 1RQ
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just e and f please thank you
Transcribed Image Text:It is 25 July 2022; you observe two treasury bills
Maturity
25 September 2022
Price
99.7985
25 March 2023 98.3855
(a) What are appropriate discount factors for 2 months and 8 months?
(b) What are the spot rates, with semi-annual compounding, for 2 months
and 8 months?
(c) What would be a fair price for a bond, maturing on 25 March 2023,
paying a 5% per annum coupon rate, with a semi-annual coupon?
(d) Now suppose that you observed a bond, maturing on 25 Septem-
ber 2023, paying a 1% per annum coupon rate (with semi-annual
coupons), trading at a yield to maturity of 2.75%. Use the DMO
formula to calculate the bond's price.
(e) What is an appropriate discount factor for 25 September 2023?
(f) Calculate forward rates (with semi-annual compounding) from 25
September 2022 to 25 March 2023, and from 25 March 2023 to 25
September 2023.
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