Question
In: Finance
Suppose that the prices of zero-coupon bonds with various maturities are given in the following table....
Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000.
| Maturity (Years) | Price | ||
| 1 | $ | 925.93 | |
| 2 | 853.39 | ||
| 3 | 782.92 | ||
| 4 | 715.00 | ||
| 5 | 650.00 | ||
a. Calculate the forward rate of interest for each year. (Round your answers to 2 decimal places.)
| Maturity (Years) | Forward rate |
| 2 | % |
| 3 | % |
| 4 | % |
| 5 | % |
b. How could you construct a 1-year forward loan beginning in year 3? (Round your Rate of synthetic loan answer to 1 decimal place.)
| Face value | |
| Rate of synthetic loan | % |
c. How could you construct a 1-year forward loan beginning in year 4?
| Face value | |
| Rate of synthetic loan | % |
Solutions
Expert Solution
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jeff jeffy answered 1 year agoRelated Solutions
The following is a list of prices for zero-coupon bonds of various maturities. a. Calculate the...
The following is a list of prices for zero-coupon bonds of
various maturities.
a. Calculate the yield to maturity for a bond
with a maturity of (i) one year; (ii) two years; (iii) three years;
(iv) four years. Assume annual coupon payments. (Do not
round intermediate calculations. Round your answers to 2 decimal
places.)
Maturity (years)
Price of Bond
1
$
978.43
2
924.97
3
840.12
4
784.39
b. Calculate the forward rate for (i) the second
year; (ii) the...
The following is a list of prices for zero-coupon bonds of various maturities. a. Calculate the...
The following is a list of prices for zero-coupon bonds of
various maturities.
a. Calculate the yield to maturity for a bond
with a maturity of (i) one year; (ii) two years; (iii) three years;
(iv) four years. (Do not round intermediate
calculations. Round your answers to two decimal
places.)
Maturity (Years)Price of Bond YTM
1 $910.90
2 $907.97
3 $828.12
4 $768.49
b. Calculate the forward rate for (i) the
second year; (ii) the third year; (iii) the fourth...
The following table records current prices for zero-coupon bonds of various maturities (all securities have a...
The following table records current prices for zero-coupon bonds
of various maturities (all securities have a face value of
$1000):
Price ($)
Bond Maturity (Years) A 1 970.87
B 2 933.51
C 3 889.00
Use the prices to value a bond with a coupon rate of 7% per
year, $100,000 face value, and three years remaining to maturity
(annual coupon payments). The next coupon payment is one year away
(i.e., at time 1).
The following is a list of prices for zero-coupon bonds of various maturities. Calculate the yields...
The following is a list of prices for zero-coupon bonds of
various maturities. Calculate the yields to maturity of each bond
and the implied sequence of forward rates. Maturity (Years) Price
of Bond
1 $917.43 YTM= IFR=
2 $826.51 YTM= IFR=
3 $737.96 YTM= IFR=
4 $653.06 YTM= IFR=
Below is a list of prices for zero-coupon bonds of various maturities. Maturity (Years) Price of...
Below is a list of prices for zero-coupon bonds of various
maturities.
Maturity (Years)
Price of $1,000 Par Bond
(Zero-Coupon)
1
$
978.14
2
893.66
3
807.34
a. A 9.7% coupon $1,000 par bond pays an annual
coupon and will mature in 3 years. What should the yield to
maturity on the bond be?
b. If at the end of the first year the yield
curve flattens out at 8.0%, what will be the 1-year holding-period
return on the coupon...
Below is a list of prices for zero-coupon bonds of various maturities. Maturity (Years) Price of...
Below is a list of prices for zero-coupon bonds of various
maturities.
Maturity (Years)
Price of $1,000 Par Bond
(Zero-Coupon)
1
$
945.80
2
877.23
3
803.34
a. A 4.8% coupon $1,000 par bond pays an annual
coupon and will mature in 3 years. What should the yield to
maturity on the bond be? (Round your answer to 2 decimal
places.)
b. If at the end of the first year the yield
curve flattens out at 8.4%, what will be...
Suppose we see the following prices for zero coupon bonds with maturities ranging from one to...
Suppose we see the following prices for zero coupon bonds with
maturities ranging from one to six years:
Maturity
in Years Bond Price
1 $98.04
2 $95.18
3 $92.18
4 $89.28
5 $86.52
6 $83.90
Note: Each bond has a face value of $100
a) What do you expect the five-year spot rate
to be one year from now? Please report the annual
rate.
b) What is the yield-to-maturity of a six-year
coupon bond that has a face value of...
The following is a list of prices for zero-coupon bonds with different maturities but same par...
The following is a list of prices for zero-coupon bonds with
different maturities but same par value of $1,000: the 1-year zero
bond sells at $925.15, the 2-year zero bond sells at $862.57, the
3-year zero bond sells at $788.66, and the 4-year zero bond sells
at $711.00. You have purchased a 4-year maturity bond with a 9%
coupon rate paid annually. The bond has a par value of $1,000. What
would be the price of the bond one year...
The following is a list of prices for zero-coupon bonds with different maturities but same par...
The following is a list of prices for zero-coupon bonds with
different maturities but same par value of $1,000: the 1-year zero
bond sells at $1000, the 2-year zero bond sells at $862.57, the
3-year zero bond sells at $788.66, and the 4-year zero bond sells
at $711.00. You have purchased a 4-year maturity bond with a 9%
coupon rate paid annually. The bond has a par value of $1,000. What
would be the price of the bond one year...
The following is a list of prices for zero-coupon bonds with different maturities but same par...
The following is a list of prices for zero-coupon bonds with
different maturities but same par value of $1,000: the 1-year zero
bond sells at $925.15, the 2-year zero bond sells at $862.57, the
3-year zero bond sells at $788.66, and the 4-year zero bond sells
at $711.00. You have purchased a 4-year maturity bond with a 9%
coupon rate paid annually. The bond has a par value of $1,000.
What would be the price of the bond one year...
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