In: Finance

1.Consider the following spot rate curve:

- 6-month spot rate: 7%.
- 12-month spot rate: 11%.
- 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
f_{1}^{2}, 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.

2. Consider the following spot rate curve:

- 6-month spot rate: 8%.
- 12-month spot rate: 10%.
- 18-month spot rate: 14%.

What is the forward rate for a one-year zero coupon bond issued
6 months from today? Equivalently, the question asks for
f_{2}^{1}, 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.

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.

1. (1 + 12 month spot rate per 6 months)^2 * (1 + 6 month rate after 1 year) = (1 + 18 month spot rate per semi annual period)^3

(1 + 5.50%)^2 * (1 + 6 month rate after 1 year) = (1 + 0.07)^3

(1 + 6 month rate after 1 year) = 1.10064

6 month rate after 1 year = 10.065% per semi annual

**6 month rate after 1 year = 0.2013 (answer)**

**Annual basis:**

(1 + 12 month spot rate ) * (1 + 6 month rate after 1 year) = (1 + 18 month spot rate )^1.5

(1 + 0.11) * (1 + 6 month rate after 1 year) = (1 + 14%)^1.5

(1 + 6 month rate after 1 year) = 1.21719 / 1.11

(1 + (6 month rate after 1 year/2)) = 1.0966

**6 month rate after 1 year = 0.1931**

**2.** (1 + 12 month spot rate per 6 months)^2 * (1
+ 6 month rate after 1 year) = (1 + 18 month spot rate per semi
annual period)^3

(1 + 5%)^2 * (1 + 6 month rate after 1 year) = (1 + 7%)^3

(1 + 6 month rate after 1 year) = 1.1112

6 month rate after 1 year = 11.12% per semi annual

**6 month rate after 1 year = 0.2223 (answer)**

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.

Consider the following spot rate curve:
6-month spot rate: 4%.
12-month spot rate: 12%.
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.

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.

Suppose we have the following current spot rate curve:
6-month spot rate: 7%.
12-month spot rate: 9%.
Despite the above spot rate curve, an investor firmly believes
that the 6-month spot rate in 6 months will be 4%, and that she can
borrow and invest $3,320 at any of the current market rates. How
much profit can this investor expect to make using the entire
borrowed amount if her belief turns out to be true?
Round your answer to 2...

Suppose we have the following current spot rate curve:6-month spot rate: 7%.12-month spot rate: 11%.Despite the above spot rate curve, an investor firmly believes
that the 6-month spot rate in 6 months will be 3%, and that she can
borrow and invest $3,080 at any of the current market rates. How
much profit can this investor expect to make using the entire
borrowed amount if her belief turns out to be true?Round your answer to 2 decimal places.

Suppose we have the following current spot rate curve: 6-month
spot rate: 4%. 12-month spot rate: 10%. Despite the above spot rate
curve, an investor firmly believes that the 6-month spot rate in 6
months will be 5%, and that she can borrow and invest $5,069 at any
of the current market rates. How much profit can this investor
expect to make using the entire borrowed amount if her belief turns
out to be true? Round your answer to 2...

An 18-month zero coupon rate is priced at USD 99.1. The 18-month
spot rate is?

The following quotations are given for the spot rate and the
1-month, 3-moth ad 6-month absolute swap rates involving the US$
and the Euro (€):
Spot rate
1.0904 Bid ($/€)
1.0910 Ask ($/€)
1-month absolute swap
0.0219 Bid ($/€)
0.0224 Ask ($/€)
3-month absolute swap
0.0463 Bid ($/€)
0.0472 Ask ($/€)
6-motnh absolute swap
0.0578 Bid ($/€)
0.0587 Ask ($/€)
Calculate forward quotes for the US $ dollar as: a) outright
forward quotes, and b) annual percentage premium or discount....

Suppose the 6-month risk free spot rate in HKD is 1%
continuously compounded, and the 6-month risk free rate in NZD is
3% continuously compounded. The current exchange rate is 5
HKD/NZD.
Suppose our usual assumptions hold, i.e., no constraints or
other frictions. What is the forward exchange rate with 6 months to
maturity such that there is no arbitrage?
Suppose again that our usual assumptions hold, i.e., no
constraints or other frictions. Suppose you can enter a forward
contract...

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