The prices of zero-coupon bonds with various maturities are given: maturity in years price 1 975.66 2 885.89 3 821.92 4 759.20 5 670.20 A) How could you construct a 1-year forward loan beginning in year 3? face value = ? rate of synthetic loan = ? B) How could you construct a 1-year forward loan beginning in year 4? face value = ? rate of synthetic loan = ?
The prices of zero-coupon bonds with various maturities are given: maturity in years price 1 975.66 2 885.89 3 821.92 4 759.20 5 670.20 A) How could you construct a 1-year forward loan beginning in year 3? face value = ? rate of synthetic loan = ? B) How could you construct a 1-year forward loan beginning in year 4? face value = ? rate of synthetic loan = ?
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 prices of zero-coupon bonds with various maturities are given:
| maturity in years | price |
| 1 | 975.66 |
| 2 | 885.89 |
| 3 | 821.92 |
| 4 | 759.20 |
| 5 | 670.20 |
A) How could you construct a 1-year forward loan beginning in year 3?
face value = ?
rate of synthetic loan = ?
B) How could you construct a 1-year forward loan beginning in year 4?
face value = ?
rate of synthetic loan = ?
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