In: Finance
Consider the following information about zero coupon bonds. Each spot rate is expressed as an annual percentage rate (APR), compounded semi-annually.
Bond | Maturity | Price | Face Value | Spot Rate(APR) |
a | 1 year | ? | $1000 |
9.66% |
b | 2 year | $856 | $1000 | ? |
a) Calculate the price of bond A and the annual spot rate (APR) of bond B
b) Calculate the price of a two-year level coupon bond (bond C) with an annual 5% coupon rate (annual payments)