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You have estimated spot rates as follows: r1= 6.40%, r2= 6.80%, r3= 7.10%, r4= 7.30%, r5=...

You have estimated spot rates as follows:

r1= 6.40%, r2= 6.80%, r3= 7.10%, r4= 7.30%, r5= 7.40%.

a. What are the discount factors for each date (that is, the present value of $1 paid in year t)? (Do not round intermediate calculations. Round your answers to 3 decimal places.)

year Discount Factor
1
2
3
4
5

b. Calculate the PV of the following $1,000 bonds assuming an annual coupon and maturity of : (i) 6.4%, two-year bond; (ii) 6.4%, five-year bond; and (iii) 11.4%, five-year bond. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

i 6.4% twoyear bond

  
Ii 6.4%fiveyear bond
iii 11.4%five year bond

Solutions

Expert Solution

jeff jeffy answered 1 year ago
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