The following is a list of prices for zero-coupon bonds of various maturities. Maturity (years) Price of Bond 1 $ 953.40 2 903.47 3 852.62 4 787.66 Required: Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annual coupon payments. Calculate the forward rate for (i) the second year; (ii) the third year; (iii) the fourth year. Assume annual coupon payments.
The following is a list of prices for zero-coupon bonds of various maturities. Maturity (years) Price of Bond 1 $ 953.40 2 903.47 3 852.62 4 787.66 Required: Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annual coupon payments. Calculate the forward rate for (i) the second year; (ii) the third year; (iii) the fourth year. Assume annual coupon payments.
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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The following is a list of prices for zero-coupon bonds of various maturities.
| Maturity (years) | Price of Bond |
|---|---|
| 1 | $ 953.40 |
| 2 | 903.47 |
| 3 | 852.62 |
| 4 | 787.66 |
Required:
-
Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annual coupon payments.
-
Calculate the forward rate for (i) the second year; (ii) the third year; (iii) the fourth year. Assume annual coupon payments.
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