Assume all rates are annualized with semi-annual compounding. Please be explicit about how you derive your results and r
Posted: Wed Mar 09, 2022 8:49 am
Assume all rates are annualized with semi-annual compounding.
Please be explicit about how
you derive your results and round to four decimals after the
comma.
$100 par of a 0.5-year 6%-coupon bond has a price of $102.
$100 par of a 1-year 4%-coupon bond has a price of $99.
a. What is the 0.5-year zero rate?
b. What is the 1-year zero rate?
c. Considering the shape of the yield curve, should the yield on
the 1-year 4%-coupon bond
be higher or lower than the 1-year par rate?
Please be explicit about how
you derive your results and round to four decimals after the
comma.
$100 par of a 0.5-year 6%-coupon bond has a price of $102.
$100 par of a 1-year 4%-coupon bond has a price of $99.
a. What is the 0.5-year zero rate?
b. What is the 1-year zero rate?
c. Considering the shape of the yield curve, should the yield on
the 1-year 4%-coupon bond
be higher or lower than the 1-year par rate?