In: Finance

The following table lists the discount factors implied by the government spot curve for the next 4 years:

Time (years) | Discount factor |

1 | 0.951 |

2 | 0.875 |

3 | 0.802 |

4 | 0.714 |

What would be the price of a 4 year 3.98% coupon bond with a Z spread of 89 bps, per $100 of par value?

Enter answer in percents.

Correct answer: 82.1536

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

Consider the three bonds quoted in the following table
(settlement: 2/15/94). Calculate discount factors and spot rates at
six-month intervals (d1, d2, d3 and y1, y2, y3), and implied six
month forward rates (f1 and f2).
Coupon Rate
Maturity
Price
67/8
8/15/94
101:20
51/2
2/15/95
101:18
45/8
8/15/95
100:21

Calculate the implied spot rate if the 5-year discount
factor is 0.8950 and you assumed semi-annual
compounding.
The spot rate should be displayed as an annual figure.
2.23%
1.95%
2.10%
1.11%

1.Empirical evidence shows that the implied forward rates
derived from a spot rate curve based on the pure expectations
theory are
A.upward-biased predictors of future spot rates
B.unbiased predictors of future spot rates
C.downward biased predictors of future spot rates
2. Empirical evidence suggests that historically, short-term
spot rates on average are higher relative to long-term spot rates
most of the time.
True
False
3. When the spot rate curve is upward sloping, the implied
forward rate:
A.is above the...

you have the following assumptions and spot rates - solve for the
implied forward ratest0t1t2t3One-year rate1.330%?????????Two-year rate1.590%??????Three-year rate1.810%Four-year rate2.030%Implied forward 1 year ratet+1f1 X
at time t+1 (in one year)Implied forward 1 year ratet+2f1 xat time t+2 (in two years)Implied forward 2 year ratet+1f2 xat time t+1 (in one year)Implied forward 1 year ratet+3f1 xat time t+3 (in three years)Implied forward 2 year ratet+2f2 xat time t+2 (in two years)

If you expect the yield curve to invert next year, with spot
rates for maturities of 10-years and above falling and spot rates
for maturities less than 10-years rising. Given your forecast,
explain which of bond Bond A or Bond B you would recommend for a
long position over the upcoming year: Bond A -discount bond with a
duration of 12-years and YTM of 5%; Bond B -coupon rate of 10%, a
duration of 12-years, and a YTM of 5%.

The following table lists the activities needed to complete a
project. The first column lists the activities and the “follows”
column shows which other activity or activities, (if any), must be
completed before these activities can start. The remaining columns
give three estimates of the activity duration; the mean duration
calculated from these estimates and standard deviation assuming a
beta distribution of activity duration.
Activity
Follows
Estimates of durations (days)
Optimistic
Most likely
Pessimistic
A
--
3
6
15
B...

The following table lists the activities needed to complete a
project. The first column lists the activities and the “follows”
column shows which other activity or activities, (if any), must be
completed before these activities can start. The remaining columns
give three estimates of the activity duration; the mean duration
calculated from these estimates and standard deviation assuming a
beta distribution of activity duration.
Activity
Follows
Estimates of durations (days)
Optimistic
Most likely
Pessimistic
A
--
3
6
15
B...

Consider the following spot rate curve: 6-month spot rate: 4%.
12-month spot rate: 10%. 18-month spot rate: 14%. What is the
forward rate for a 6-month zero coupon bond issued one year from
today? Equivalently, the question asks for f12, where 1 time period
consists of 6 months. Remember, like spot rates, forward rates are
expressed as bond-equivalent yields. Round your answer to 4 decimal
places. For example if your answer is 3.205%, then please write
down 0.0321.

Consider the following spot rate curve: 6-month spot rate: 5%.
12-month spot rate: 9%. 18-month spot rate: 13%. What is the
forward rate for a one-year zero coupon bond issued 6 months from
today? Equivalently, the question asks for f21, where 1 time period
consists of 6 months. Assume semi-annual compounding. Round your
answer to 4 decimal places. For example if your answer is 3.205%,
then please write down 0.0321.

Consider the following spot rate curve: 6-month spot rate: 7%.
12-month spot rate: 10%. 18-month spot rate: 13%. What is the
forward rate for a 6-month zero coupon bond issued one year from
today? Equivalently, the question asks for f12, where 1 time period
consists of 6 months. Remember, like spot rates, forward rates are
expressed as bond-equivalent yields. Round your answer to 4 decimal
places. For example if your answer is 3.205%, then please write
down 0.0321.

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