Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The

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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.

b. How could you construct a 1-year forward loan beginning in year 3? Confirm that the rate on that loan equals the forward rate.

c. Repeat part

(b) for a 1-year forward loan beginning in year

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ISE Investments

ISBN: 9781266085963

13th International Edition

Authors: Zvi Bodie, Alex Kane, Alan Marcus

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Question Posted: Jul 31, 2024 08:00 AM

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Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The

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ISE Investments

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