Two treasury bonds (with semi-annual coupons) are traded. The first bond matures in six months, has coupon rate 8% per annum, and has dirty price $98.99. The second bond matures in twelve months, has coupon rate 12% per annum, and has dirty price $103.50. What is the twelve month spot rate with semi-annual compounding? 8.23% 8.05% 8.28% 8.40%
Two treasury bonds (with semi-annual coupons) are traded. The first bond matures in six months, has coupon rate 8% per annum, and has dirty price $98.99. The second bond matures in twelve months, has coupon rate 12% per annum, and has dirty price $103.50. What is the twelve month spot rate with semi-annual compounding? 8.23% 8.05% 8.28% 8.40%
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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Question
Two treasury bonds (with semi-annual coupons) are traded. The first bond matures in six months, has coupon rate 8% per annum, and has dirty price $98.99. The second bond matures in twelve months, has coupon rate 12% per annum, and has dirty price $103.50. What is the twelve month spot rate with semi-annual compounding?
|
8.23% |
||
|
8.05% |
||
|
8.28% |
||
|
8.40% |
Expert Solution
Step 1
Given:
| Particulars | Amount |
| First bond | |
| Dirty price | $98.99 |
| 6 months Coupon rate | 8.00% |
| Second bond | |
| 12 months coupon rate | 12.00% |
| Dirty price | $103.50 |
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